A wave of selling has driven 30-year US Treasury yields to roughly 5.27%, a development that is proving troublesome for Treasury Secretary Scott Bessent. Canada's long bond looked comparatively resilient, yielding 4.15% at 3:30 p.m. in New York on Tuesday. That puts the Canada-US long-bond gap wider than usual; over the past decade, Canada's 30-year has averaged about 70 basis points below its US counterpart, according to Bloomberg data.
For shorter notes, Canada's 10-year yield ticked up by about one basis point in the afternoon to 3.745%. That ranks as the third lowest in the G7 at that tenor, and German and Japanese 10-year debt is currently more expensive. Even so, Canada's 10-year sits about 37 basis points above where it was at the start of July, and the spread versus US 10-year notes has tightened slightly over that span.
While at the Group of 20 gathering in Asheville, North Carolina, Finance Minister Francois-Philippe Champagne told reporters, "The bond market is showing a lot of confidence in Canada, both in the short term and in the long term because of the measures that we've been taking." He added, "We're entering this period in a position of strength," pointing to reduced expenses, higher revenues, and strategic choices.
The flow data back that up: Statistics Canada reported a record C$80.8 billion of foreign buying of Canadian government bonds in Q2. Champagne also cautioned that Canada is "not immune to the geopolitical conflicts that are happening," and referenced the wars in Iran and Ukraine as causes of turmoil in world energy markets and higher costs for consumers.
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Diplomatic ties with Washington are strained. After negotiations fell apart on Aug. 21, the two sides introduced additional duties on each other's goods, and President Donald Trump as well as other US officials have spoken derisively about Canada. On Monday, Bessent waved off suggestions that the US and its northern neighbor are locked in a trade war, joking, "take their two submarines from the Edmonton mall and sic them on us." He was referring to a visitor attraction that the West Edmonton Mall got rid of in 2005.
On Tuesday, Prime Minister Mark Carney said talks would remain on hold until the US stops "throwing shade" at Canada and engages earnestly with the matters at hand. Champagne said he intends to be "constructive" yet "firm" in his Tuesday meeting with Bessent.
Ottawa is expected to unveil a fresh federal budget in the coming months. In April, the finance department forecast a C$65.3 billion deficit for the current fiscal year, roughly 2% of GDP. A majority of economists in a Bloomberg survey anticipate an even larger deficit than that projection.
For your wallet, here is the through-line: steady demand for Canadian bonds has kept long-term yields under US levels even as rates rise. If that vibe persists, it can shape mortgage costs, project financing, and the overall borrowing climate for everyday Canadians.
