Canada's Inflation Spooks Bonds Around the World

Canada's CPI inflation rate in August jumped to 4.0% from 3.3% in July on higher gasoline prices. Shelter prices also jumped by 6.0% after a 5.1% advance in July, pushed up in part by rising rents and higher interest rates. The closely watched trimmed-mean CPI rate unexpectedly rebounded to 3.9%, well above expectations of 3.5%. The Canadian 10-year government bond yield jumped to 3.86% from 3.76% (chart).

The German 10-year Bund surged to 2.74% on a hawkish statement by an ECB official on Monday that the central bank might not be done raising interest rates (chart). Since the beginning of the month, the Japanese 10-year government bond yield is up from 0.63% to 0.72% after BOJ Governor Kazuo Ueda stated on September 9 that the central bank could end its negative interest rate policy.