Canada's 10-year government bond yield climbed above 3.45% in January, a seven-week high, as investors assessed domestic labor market data and tracked a sharp rise in US Treasury yields driven by stronger-than-expected US employment figures. Canada's unemployment rate eased to 6.7% in December, below forecasts of 6.9%, but remained the second highest since September 2021, reflecting labor market softening highlighted by Bank of Canada policymakers. Political and fiscal uncertainties, including heightened deficit risks and Prime Minister Trudeau's resignation, added to risk premiums. Meanwhile, the US 10-year Treasury yield hit a 14-month high as December payrolls exceeded expectations at 256K, and the unemployment rate fell unexpectedly to 4.1%, bolstering expectations that the Federal Reserve may slow its pace of rate cuts.
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