Canada's 10-year government bond yield fell to below 3.45%, retreating from a six-month high of 3.54% on January 14, tracking the decline in U.S. Treasury yields after core inflation showed an unexpected slowdown in December. This fueled expectations of potential Federal Reserve rate cuts earlier this year. However, investors remain cautious, especially after reports suggested that President-elect Donald Trump's economic team is considering a gradual increase in trade tariffs, with monthly hikes ranging from 2% to 5% to avoid sudden inflation spikes. Meanwhile, Canada's unemployment rate eased to 6.7% in December, better than the forecasted 6.9%, though it remained the second highest since September 2021, reflecting ongoing labor market softness highlighted by Bank of Canada policymakers.
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