10:53 AM EDT, 06/22/2026 (MT Newswires) -- Bond yields were steady to slightly higher after Canadian inflation accelerated on Monday, while TD Economics said the country's central bank is likely to remain on the sidelines for some time.

"Apart from energy costs and some emerging tech price pressures inflation remains very well behaved in Canada, as a relatively soft demand backdrop leans against sellers raising prices," wrote TD Senior Economist Leslie Preston in a note. "We expect this to keep the Bank of Canada on the sidelines for quite some time."

Headline inflation climbed to 3.2% year-over-year in May from 2.8% in April, Statistics Canada data showed. The annual headline inflation exceeded expectations and the increase was driven largely by higher gasoline prices, according to TD Economics.

Underlying inflation remained stable, with the Bank of Canada's preferred core measures averaging annually 2.1%, which was unchanged from the prior month, Preston said.

With oil prices having declined sharply in recent weeks following a preliminary U.S.-Iran agreement for an end to the conflict between the two, gasoline prices have also eased. As a result, TD estimates May to represent the peak in headline inflation for the year.

Yields on Canadian 5-year bonds rose 1.4 basis points to 3.06% while 10-year notes were less than 1 point higher at 3.4% recently.