Canada's Bonds Ignore Better Core CPI to Focus on Oil, Says BMO

06:20 AM EDT, 05/20/2026 (MT Newswires) -- Sustained upward pressure on oil prices appears to be the sole focus of bond markets, said Bank of Montreal (BMO).

Even the friendliest reading on core inflation in about five years couldn't halt the rout in Government of Canada (GoC) bonds, noted the bank. In particular, the 30-year yield pushed above 4.05% on Tuesday, its highest since 2010.

Meanwhile, 30-year United States Treasury yields have rocketed to nearly 5.2%, the highest since June 2007, pointed out the BMO.

According to the bank, this is a "seismic" shift in long-term yields: from early 2015 to early 2022, the average 30-year GoC yield was just under 2% -- in other words, gripping the "1-handle" on average for a seven-year period.

What makes the grinding rise especially notable is that it is coming at a time of a steady and sustained drop in underlying inflation, stated BMO. The Bank of Canada's trim measure faded to a five-year low of 2.0% in April, and even slightly below its pre-pandemic trend.

With plentiful slack in the Canadian economy and the housing market on snooze, it's likely that core inflation is headed even lower in the coming months, added the bank.

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