Scott Barlow, a market strategist with extensive experience in Canadian investment banks, explains the impact of rising bond yields on various aspects of the economy during an episode of The Decibel podcast. He clarifies that bonds function as contracts where entities borrow money and promise to pay interest back to lenders over time. As bond yields rise—currently around 5% for U.S. 10-year Treasury bonds—they decrease the value of existing bonds with lower yields, affecting mortgage rates, car loans, and investments like GICs and long-term bonds. This increase in yields is seen as a potential indicator of a shift towards higher interest rates and slower economic growth, impacting global markets including Canada's due to the U.S. dollar’s role as a reserve currency and its dominant economy.
Written by the local model on 2026-09-17,
using this article's own text rather than the other coverage of the
same event (that is the story summary below).
The bond market has gained increased attention in recent weeks as fluctuations and record highs affect consumers and investors alike, influencing inflation, mortgages and car loans, GICs, long-term bonds and more.
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fluctuations → gain → inflation
But what is a bond yield, how does the bond market work, why is it so critical to the global financial system and how does it touch Canada specifically?
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it → work → Canada
Scott Barlow, a market strategist for The Globe and a 20-year veteran of Canadian investment banks recently joined The Decibel podcast and spoke with host Sherrill Sutherland to break it all down.
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Barlow → join → it
(Listen to the episode below, or find it on the podcast player of your choice.)
What is a bond?
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bond → listen → choice
It’s basically a contract where an entity borrows money and agrees to pay interest to the people who have lent it that money.
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who → ’ → money
For instance, a government might say “I need money to pay my giant bureaucracy, so I’m going to give you a piece of paper and you’re going to give me $100.
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you → say → 100
And I will give you interest payments twice a year of 5 per cent on that amount until the period of the bond is over.”
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period → give → bond
Governments and big institutional investors buy and issue bonds, right?
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Governments → buy → bonds
And consumers can buy them for their portfolios, too.
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consumers → buy → portfolios
How do you make money from a bond?
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you → make → bond
If you buy a bond for $100 when it’s issued, for example, and there’s a 5-per-cent yield on it, you get $5 per year on the $100, and then you get the principle back at the end of the five-year period.
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you → buy → period
That’s if you hold it, and it’s the simplest way of making money from a bond.
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it → ’ → bond
Or you can buy and sell bonds at different prices as the market changes.
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market → buy → prices
Say interest rates went up to 6 per cent from 5 per cent.
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rates → say → cent
The new bond will yield 6 per cent, but yours – the one you held – will only yield five.
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you → yield → five
So, the value of the bond decreases.
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value → decrease → bond
U.S. Treasury or government bonds are considered one of the safest bond investments, and they influence the global economy, including Canada’s.
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they → consider → Canada
When their interest rates move, either everyone else’s rates move, or the value of their currency fluctuates quickly.
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value → move → currency
Bond yields have increased recently.
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yields → increase → ?
How does this compare with where they’ve been previously?
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they → compare → ?
But the concern is that they’re on a steady upward trajectory, and people are extrapolating that to mean significantly higher bond yields, a slower economy and weaker stock prices.
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that → ’re → yields
The U.S. 10-year bond yield is trading around 5 per cent, which is an important philosophical number for U.S. investors.
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which → trade → investors
That kind of woke people up to that fact that we might be in a different environment with bond yields and interest rates.
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we → wake → yields
One thing to discuss are discounted cash-flow calculations.
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calculations → discuss → ?
If someone said they’d give you $95 now or $100 18 months from now, there is an actual calculation that reveals the smarter way to do it.
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that → say → it
In other words, $100 18 months from now holds an actual value now.
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100 → hold → value
The higher the interest rate, the more you want your money now.
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you → want → money
Why are bond yields going up right now?
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yields → go → ?
What has been driving them?
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What → drive → them
The central bank is concerned about something called contagion, which looks at the way higher oil prices trickle through the economy, creating higher gas prices at the pump, for example.
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prices → call → example
If prices start increasing by 3 or 4 per cent, people start asking for raises because of affordability issues.
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people → start → issues
This can lead to what’s called a wage-price spiral, which drives up interest rates.
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which → lead → rates
With tariffs, U.S. goods we used to import at cheaper prices are now more expensive.
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we → use → prices
Companies try passing the tariff cost to the consumer, which causes goods to increase in price, creating inflation.
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goods → pass → inflation
As a result, the central bank will raise interest rates in an effort to lower demand and slow the economy so that prices don’t spiral out of control.
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prices → raise → control
Bond yields price off of the central bank’s policy rate, so if the Bank of Canada raises interest rates 25 basis points, for example, all things being equal, bond yields go up the same amount.
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yields → raise → example
That increases borrowing costs, which can slow the economy and ease demand so that prices don’t skyrocket.
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prices → increase → demand
Do bond yields reflect how investors view the state of the future economy?
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investors → reflect → economy
The differential between short-term and long-term bonds can give a sense of where markets believe growth is going.
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growth → give → sense
The most common measure is the steepness of the yield curve, comparing two-year versus 10-year yields.
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measure → compare → yields
…and 30 more, not listed.
The Aporia
