Two central banks split on the same day, and yields whipsawed from Toronto to Washington
The Federal Reserve held its key rate Wednesday while the Bank of Canada raised its own, leaving bond markets swinging and US stocks steady.
The Bank of Canada raised its policy rate by 25 basis points to 2.5%, its first increase since 2023, as inflation is projected to worsen. It said another hike is possible. The Fed left its rate at 3.75% to 4.00%.
The hike ended a pause at 2.25% that began in October 2025. Canada lost 68,000 jobs in September, and unemployment rose to 6.5%, MoneySense reported. The next Bank of Canada decision is scheduled for Dec. 9.
For wealth professionals, the split offers a live test of how client portfolios respond to higher rates on both sides of the border.
Bond yields swing after the Fed decision
The Fed said two officials wanted to raise rates but were outvoted, according to The Associated Press (AP). The Fed raised rates last month for the first time in three years.
The two-year Treasury yield first climbed above 4.79% from 4.70% late Tuesday. It then fell as low as 4.69% as Fed chairman Kevin Warsh spoke.
Warsh said the central bank wanted to see how conditions play out before its next move. He pointed to higher loan rates and lenders and investors who have become “more discerning.” He said officials largely judged that “monetary medicine” is “starting to work some.”
Warsh added that “broadly, these developments go in the direction” of helping the Fed reach its goals of a healthy job market and relatively low inflation. Inflation has stayed above the Fed’s 2% target for years.
Traders still see more Fed hikes as likely. However, they trimmed bets on how many may come by next summer, according to CME Group data.
The 10-year Treasury yield rose to 5.02% from 4.99% late Tuesday. Rising oil prices also nudged yields up. Brent crude climbed 2% to US$111.64 a barrel.
Stocks edge higher
US stocks ticked up, with little movement before or after the Fed’s decision:
- S&P 500: up 0.3% to 7,743.98
- Dow Jones Industrial Average: up 0.2% to 52,475.10
- Nasdaq composite: up 0.3% to 26,549.85
Higher rates push down on stock prices, which raises pressure on companies to grow profits. Several firms that beat analysts’ expectations rallied. GE HealthCare Technologies climbed 6.6% and Etsy rose 5.4%.
Artificial intelligence stocks also held up. They have stabilized this week after swings on worries that high borrowing costs will undercut data centres, which are largely built with borrowed money.
South Korea’s SK Hynix soared 10.9% after its profit report. The memory chip maker said it expects demand to outpace supply through 2030. In New York, Micron Technology rose 5.9%.
For advisors, the AI reaction shows how closely borrowing costs and growth-stock valuations are tied.
Outside tech, Wendy’s jumped 15.1% after Trian Fund Management offered to buy the chain. Boston Scientific fell 5.8% on a weaker profit forecast, and Robinhood Markets sank 3.3%.
Abroad, South Korea’s Kospi jumped 6.6% and Japan’s Nikkei 225 rose 1.1%. France’s CAC 40 edged down by less than 0.1%.
