U.S. Highlights
The 10-year Treasury yield briefly exceeded 5% earlier this week but has since decreased to 4.85%. The advance estimate of GDP for the third quarter showed strong economic growth. The FOMC is expected to keep rates steady next week, but inflation and labor market data will influence their decision on future rate hikes.
Canadian Highlights
Concerns about the impact of higher rates on growth dominated markets this week. Equities and yields fell. The Bank of Canada kept the policy rate at 5% and emphasized the economic toll of higher rates. However, they maintained a hawkish tone due to robust wage growth, elevated inflation expectations, and corporate pricing behavior.
U.S. – Economic Resilience on Full Display in Third Quarter
Long-term Treasury yields remained high due to various factors, including the threat of a government shutdown and geopolitical tensions. The 10-Year Treasury yield reached 5% but has since settled at 4.85%. Equities decreased for the second consecutive week but remain higher for the year. The Bureau of Economic Analysis released the advance estimate of third-quarter GDP, showing significant growth, especially in consumer spending. However, policymakers are concerned about spending momentum and inflation. The upcoming Employment Cost Index and employment figures will influence future rate hike decisions.
Canada – Holding the Line
Financial markets were more dovish this week due to concerns about higher rates and their impact on growth. The Bank of Canada maintained rates and highlighted the effects of rates on economic activity. They projected modest growth for the third and fourth quarters and expressed concerns about inflation and wage growth. The upcoming Labour Force Survey will provide more insight into wage growth.
