September 23, 2026

Fun day for bonds:

The world’s most influential bond yield surged decisively above 5 per cent on Wednesday as more signs emerged of growing inflationary pressures in the U.S., sending stocks and fixed income portfolios tumbling.

The benchmark U.S. 10-year yield briefly rose to near 5.14 per cent, back to where it was in 2007 before the global financial crisis caused yields to crater. In late afternoon trading, it was fetching 5.10 per cent, up 16 basis points for the session.

That was still a large daily move for the bond market, and had Canadian bond yields surging as well. The Canada five-year yield, closely followed for its impact on fixed mortgage rates and GICs, hit its highest since 2024.

Bond yields were higher across the curve – from short-term tenures to long term – an indication that traders were bracing not only for rate hikes but also for inflationary pressures to linger. That also meant investors widely suffered declines in bond portfolios – prices move inversely to yields.

All three major U.S. equity indexes weakened, with losses for Canada’s S&P/TSX Compositive Index – heavily weighted towards materials and interest-sensitive stocks that tend to weaken when yields rise – outpacing Wall Street. It closed down 584.18 points, or 1.6 per cent, marking its biggest one-day decline since June 5.
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Adding to the hawkish tone, Fed Governor Michael Barr said that the central bank took an important step last week to “recalibrate” short-term borrowing costs to bring down inflation, and signaled ‌that further rate ​hikes will likely be needed.

Fed funds futures traders are now pricing in a 66 per cent chance of an October rate hike, up from 53 per cent a day earlier.
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The U.S. ⁠Treasury Department also drew very weak demand for a US$70-billion 5-year note auction amid the bond market selloff, with the notes selling at the highest yield ​at an auction since 2007.
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The Dow Jones Industrial Average fell 0.68 per cent and the S&P 500 dropped 0.75 per cent. The Nasdaq Composite was down 1.13 per cent, a sharp reversal after hitting a record high on Tuesday.

Canada five-years at 3.68%! Who’da thunk it?