Hawkish Repricing for Bank of Canada Rate Hikes May Be Overdone, Says SocGen

08:53 AM EST, 12/10/2025 (MT Newswires) -- Bond nerves are jangling in Canada after the jobs report last Friday triggered the rout in government bonds, said Societe Generale.

The Bank of Canada wasn't at all anticipating the improvement in the labor market at the last meeting, but a glance under the bonnet suggests that perhaps the hawkish repricing is a tad overdone, stated SocGen.

The participation rate fell and the bulk of the decline in unemployment was concentrated among young workers, where the jobless rate surged to nearly 15%.

The rates curve is now pricing in a rate hike in October 2026, not quite as soon as in Australia's May, but for an economy exposed to disruptive effects and downside risk from United States tariffs, this is a "significant" shift in narrative, wrote the bank in a note to clients.

The Reserve Bank of Australia didn't explicitly discuss a rate hike earlier this week and the BoC won't do that either at Wednesday's policy meeting, according to SocGen.

The BoC's Monetary Policy Report previously assumed that the recovery in GDP would be slow because the reallocation of capital and labor in the economy and the weakness in the labor market would weigh on household spending, pointed out the bank, as to the conditions under which the rates cycle turns next year.

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