Global economy shudders on oil spike, bond selloff — SkimNews
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- Oil prices surged Thursday with WTI past US$100 (first time since May) and Brent at US$108 — up more than 40% since early July — as fighting in the Middle East intensified.
- 10-year U.S. Treasury yields hit 4.95%, the highest level since 2007, while the equivalent Government of Canada bond reached 3.95%, a level last seen in 2023.
- The European Central Bank raised interest rates Thursday, with President Christine Lagarde warning that "inflation will be longer lasting than we had anticipated."
- Bank of Canada Governor Tiff Macklem told markets upside inflation risks from oil now outweigh downside risks from the Canada-U.S. trade war, with traders now betting on a quarter-point BoC hike by year-end.
- Houthi forces captured a strategic port in Yemen on Thursday, threatening shipping through the Bab al-Mandab Strait, while the U.S. and Iran ramped up tanker strikes in the Strait of Hormuz.
- S&P Global Energy does not see oil returning to prewar levels before end of 2027, expecting prices to average US$80-US$100 through next year.
- Long-term yields are also being pushed higher by large fiscal deficits, a surge in AI-related corporate bond issuance, and central banks trimming U.S. Treasury holdings — Treasury Secretary Scott Bessent's direct bond-buying interventions have done little to stop the climb.
Why it matters: For Canadian households, the combined squeeze of oil above US$100 and the Bank of Canada shifting hawkish means mortgage and borrowing costs that were expected to ease are rising instead. BMO's Doug Porter put it plainly: 'Any hopes that mortgage rates, borrowing costs are going to come down are quickly going out the window here.'
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