Canada’s Futures Price a December Rate Increase as US Payrolls Rise 29,000
Canada’s one-month CORRA futures closed Friday priced for a December rate increase, a quarter point on the Bank of Canada’s overnight rate by Wednesday, December 9, on our arithmetic. Those settlements came hours after the American jobs number. US payrolls rose 29,000 in September 2026, the Bureau of Labor Statistics reported in its Employment Situation release on Friday, October 2, 2026 at 08:30 ET. Economists surveyed by Bloomberg had looked for about 90,000. The unemployment rate moved to 4.2 percent from 4.1 percent, leaving 7.1 million people unemployed, and average hourly earnings rose 5 cents to $37.81, up 3.0 percent over 12 months.
Canada’s own futures market closed the week priced for an increase
The Bank of Canada’s target for the overnight rate is 2.25 percent, and its next announcement is Wednesday, October 28, 2026 at 09:45 ET, with a Monetary Policy Report. The one after is Wednesday, December 9.
Canada has a market that prices those dates directly. The Montreal Exchange lists one-month CORRA futures, and on the exchange’s contract specification the underlying is the compounded daily Canadian Overnight Repo Rate Average during the contract month, so 100 minus the price is the rate implied for that month. Friday’s settlements were 97.6300 for November 2026 and 97.5000 for December. CORRA runs a few basis points above the target and we measured that gap rather than assuming it. We averaged CORRA across September’s calendar days, carrying the last fix forward through weekends and holidays, which gives 2.2947 percent against the 2.25 percent target. That is a basis of 4.5 basis points, and every figure below is net of it. CORRA has edged up since that September average, to 2.30 percent on October 1, and a wider basis lowers those implied rates slightly rather than raising them.
November is the first contract lying wholly after October 28, which makes it the only clean read on that date. It implies an overnight rate of about 2.33 percent, roughly 7 to 8 basis points above the current target, against the 25 a full quarter point would take. October 28 is priced as a lean, not a decision.
December contains its own announcement, so eight days of the month sit at November’s rate and twenty-three at whatever the Bank sets on the day, a split that assumes a change takes effect on announcement day. Solving that blend gives about 2.50 percent from Wednesday, December 9, which is 25 basis points above today’s 2.25 percent. Both figures are our arithmetic on the exchange’s October 2 settlement prices.
The Bank of Canada overnight rate target the Montreal Exchange’s one-month CORRA futures were pricing at the October 2, 2026 settlement. Each step is the rate implied for the period after that announcement, net of the 4.5 basis point gap between CORRA and the target measured over September 2026. Our calculation from exchange settlement prices and Bank of Canada Valet series AVG.INTWO and V39079.
How thin this market is belongs in the same breath as the numbers. November, the more actively traded of the two contracts the solve uses, holds 411 contracts of open interest and traded 155 lots on Friday, and the exchange’s quote page carried no bid and no ask against it. December, which carries the quarter-point conclusion, holds more open interest at 446 and traded 34. January 2027 traded 350 on open interest of 110, and its posted quote is a bid of 97.3850 against an ask of 98.2900, 90.5 basis points of implied rate apart.
A clean quarter point is also a round number, and 34 contracts is a thin basis for one. The best answer to that is the January contract, which traded ten times the volume: at 97.4400 it implies a CORRA of 2.5600 percent for the month, or 2.5153 percent net of the same basis, within about 1.5 basis points of the 2.5005 percent the December blend solves to. January’s month blends 26 days after December 9 with 5 after the January 27 announcement, so it is a consistency check rather than an independent estimate, but two separately traded contracts agreeing to within a basis point and a half is a firmer footing than 34 lots alone. What a settlement on this volume supports is a level.
The Canadian case for an increase sits in the inflation data and the dollar
The Canadian case starts with the Bank’s own inflation numbers. On the Bank’s published Total CPI index, 169.8 in August 2026 against 164.8 a year earlier, headline inflation is running at about 3.0 percent year over year on our arithmetic, against a 2 percent target. Two of its three core measures the same month sit at that target and the third sits above it: CPI-trim at 1.9 percent, CPI-median at 2.0 and CPI-common at 2.6. A reader who weighs trim and median sees one picture, and a reader who weighs headline at 3.0 alongside CPI-common at 2.6 sees another.
The currency is the channel that ties an American decision to Canadian prices. Rates 150 to 175 basis points higher in the United States than in Canada are a reason to hold US dollars rather than Canadian ones, and the Canadian dollar is 1.81 percent weaker since the day the Fed raised. Imports priced in US dollars are bought with that weaker dollar. That is our reading of why a Fed that is raising can make a Canadian increase more likely rather than less.
The Canadian bond market points the same way, if you read it in levels. The Government of Canada 2-year at 3.27 percent on October 1, the Bank’s latest published observation, sits 102 basis points above the 2.25 percent target, and we read a two-year sitting that far above the policy rate as a market pricing more increases rather than fewer, which is what the futures are priced for. It is also exactly where it closed on September 17, the day the Fed raised, having traded as low as 3.25 and as high as 3.40 in between. The US two-year sits 83 basis points above the top of the Fed’s range and 108 above the bottom, so the Canadian two-year sits further above its own policy rate measured to the top of that range and slightly less far measured to the bottom.
The gap shows up in the curves as well as in the two policy settings: on October 1 the US 2-year at 4.78 percent stood 151 basis points above the Canadian 2-year. Our piece on Canada’s 10-year yield and the US gap traces how unevenly the Canadian long end has tracked the American one.
The monthly change sits inside the agency’s own error bar
BLS publishes a measurement error on its own headline, and it is larger than the headline. The release’s Technical Note states that “the confidence interval for the monthly change in total nonfarm employment from the establishment survey is on the order of plus or minus 122,000”, at the 90-percent level the agency says it generally works to.
So 29,000 sits well inside that interval, and on the agency’s own measure September cannot be distinguished from zero. The 61,000 distance between the print and the roughly 90,000 forecast from the Bloomberg survey is inside it too, so the gap to what economists expected is smaller than the measurement error. The release’s own summary sentence reads: “Both nonfarm payroll employment (+29,000) and the unemployment rate (4.2 percent) changed little in September”.
Where the 29,000 came from is worth the arithmetic. Health care added 17,000, construction 11,000 and manufacturing 9,000, financial activities lost 7,000, and BLS calls the other sectors it names little changed. Three gaining sectors therefore sum to 37,000 against a headline of 29,000, health care alone is more than half the month, and BLS puts the prior 12-month average at 45,000 a month.
On the household survey’s count, the rate’s tick up to 4.2 percent came alongside a growing labour force rather than job losses. That survey’s count of employment rose 406,000 in September while the count of unemployed rose 78,000, from 7,031,000 to 7,109,000, so the labour force grew by about 484,000. The same Technical Note puts the 90-percent interval for the monthly change in the unemployment rate itself at about plus or minus 0.3 percentage point, a figure the agency states at an unemployment rate of around 6.0 percent rather than September’s 4.2. The rate moved 0.1 point. Participation rose to 61.8 percent from 61.6 and the employment-population ratio to 59.2 from 59.1, both of which BLS describes as little changed. On the rate itself: “The unemployment rate has remained in a narrow range of 4.1 percent to 4.3 percent since March.”
The revisions took 60,000 off July and August
On our reading, the information in Friday’s release sits here rather than in the headline. The revisions paragraph reads:
“The change in total nonfarm payroll employment for July was revised down by 31,000, from +21,000 to -10,000, and the change for August was revised down by 29,000, from +162,000 to +133,000. With these revisions, employment in July and August combined is 60,000 lower than previously reported.”
July 2026 has now been reported three ways.
| Estimate | Reported July 2026 payroll change |
|---|---|
| First print, August 2026 release | -23,000 |
| Second estimate, September 4, 2026 release | +21,000 |
| Third estimate, October 2, 2026 release | -10,000 |
A 44,000 swing up, then a 31,000 swing back down, on a month that is now one in which US employment fell.
That distinction is the spine of it. Plus or minus 122,000 is sampling noise on one fresh month, and the reason not to read much into 29,000 either way. A 60,000 markdown of two settled months is another thing entirely, a revision to collected data applied to months markets had already priced. Nor is it finished: the BLS data flags September and August 2026 with footnote code P, preliminary, while July and June carry none.
The move came at 08:30 and was unwound before noon
The Federal Reserve walked into Friday raising rates, and that is a recent turn. Its own table of open market operations records three cuts of 25 basis points in 2025, on September 18, October 30 and December 11, taking the range down to 3.50 to 3.75 percent. The only move since is an increase of 25 basis points on September 17, 2026, to the 3.75 to 4.00 percent range that still stands.
What the Treasury market then did is on the record minute by minute. The readings below are CBOE’s Treasury yield indices rather than Treasury par yields, from one-minute Yahoo Finance data, and they track Treasury’s own closes to within half a basis point. Our record runs from 08:20 to 14:59 ET, and every high and low is an extreme of that window. Times are ET on Friday, October 2.
| Tenor | 08:29, pre-release | Low after the print | Back to or above the 08:29 level at | High, 13:28 | Treasury close |
|---|---|---|---|---|---|
| 5-year | 4.989 | 4.911 at 08:31, down 7.8 bp | 10:09 | 5.079, up 9.0 bp | 5.06, up 5 bp |
| 10-year | 5.224 | 5.159 at 08:31, down 6.5 bp | 10:49 | 5.298, up 7.4 bp | 5.28, up 4 bp |
| 30-year | 5.604 | 5.553 at 09:01, down 5.1 bp | 11:02 | 5.647, up 4.3 bp | 5.63, up 2 bp |
On our arithmetic the entire first reaction was gone before noon: the five-year back to its pre-release level at 10:09, 98 minutes after its 08:31 low, the ten-year at 10:49 and the thirty-year at 11:02. The reversal then ran well past flat, with the shortest of the three tenors observed moving most in both directions.
Treasury’s own daily par yield curve is the day’s official record, and on it the selling was uniform across the middle of the curve. Bills out to two months closed lower in yield, the 1-month down 2 basis points to 4.04 percent and the 2-month down 2 to 4.11, while the 3-month rose 2 to 4.19 and the 4- and 6-month were unchanged. From one year out everything closed higher: the 1-year up 2 basis points to 4.46, the 2-, 3-, 5- and 7-year up exactly 5 each, the 10-year 4, the 20-year 3 and the 30-year 2. Nine tenors up, three down, two unchanged.
Two things follow from that shape. Because the rise shrank with maturity past the seven-year, each of the three standard spreads flattened: two-year to ten-year by a basis point, from 46 to 45, two-year to thirty-year by 3, from 83 to 80, and ten-year to thirty-year by 2, from 37 to 35. And because the 1-month fell while the 2-year rose 5, the curve steepened against bills. A bear flattening with a steepening at the front is, on our reading, a market pricing more near-term tightening and slightly less long-run premium.
One reading of that level, ours. The 2-year note closed at 4.83 percent, 83 basis points above the 4.00 percent top of the funds range against 78 on October 1, and the same reading we applied to the Canadian two-year says a market pricing more increases rather than fewer, with the shortest bills pointing mildly the other way.
The Fed turned from cutting to raising on September 17, two weeks before this report rather than in response to it, and Friday’s was the last Employment Situation either committee sees before October 28. A committee holding that stance after two settled months have been marked down by 60,000 is, on our reading, treating inflation rather than employment as its binding constraint. US headline CPI ran 3.4 percent over the 12 months to August 2026 and core, less food and energy, 2.4 percent, on our arithmetic on the BLS index. Which is why September CPI on Wednesday, October 14 bears harder on that decision than Friday’s payrolls do.
Equities rose on the same session yields rose. On Yahoo Finance’s closes the S&P/TSX Composite finished at 35,502.70, up 0.99 percent, the S&P 500 up 0.73 percent and the Nasdaq Composite up 1.19 percent. Those are two facts about one day, and what moved the Canadian session name by name is in our report on Friday’s TSX close.
What a rising Canadian path does to a portfolio
A Canadian household meets the bond market at its own five-year point. The 5-year Government of Canada yield, 3.62 percent on October 1, is what a five-year fixed mortgage is priced off, while a variable rate tracks the overnight target those futures put at about 2.50 percent from December 9. Both are quoted at a spread over those benchmarks rather than at them, so a renewal between now and the spring is a choice between the two curves, not between the two numbers, and we weighed that choice in our piece on fixed versus variable mortgages in Canada.
A higher discount rate works on every TSX name that trades like a bond, and two Canadian REIT funds closed lower on the session the index rose. On Yahoo Finance’s closes the iShares S&P/TSX Capped REIT Index ETF (XRE) finished at 15.45, down 0.26 percent, and the BMO Equal Weight REITs Index ETF (ZRE) at 22.23, down 0.27 percent, against the Composite’s 0.99 percent gain. Neither move is large, and XRE fell 0.77 percent on October 1 when the Composite fell 0.23, so this is one dated session beside another rather than a trend. A buyer there is weighing a distribution against a Government of Canada yield, and if the futures are right about December that comparison gets harder, which is the question to take to Canadian REITs.
The currency is the other side of that rate gap, and it takes two numbers to state honestly. The Bank of Canada publishes the pair, and inverted it says one Canadian dollar bought 0.7149 US dollars on September 17, the day the Fed raised, and 0.7020 on October 2: the Canadian dollar is 1.81 percent weaker. The pair moved further than that, 1.3988 to 1.4246, up 1.84 percent, and the pair’s move is the one a portfolio feels. An unhedged Canadian holder of US assets picked up 1.84 percent from the exchange rate alone over that window, before the assets themselves did anything.
October 28, and what each committee still sees
The FOMC and the Bank of Canada announce on the same Wednesday, October 28, 2026, and the Canadian market ended the week still priced for an increase. Before then the Bank gets the September Labour Force Survey on Friday, October 9 and September CPI on Monday, October 19, and the Fed gets September CPI on Wednesday, October 14. The next US payroll report is not due until Friday, November 6.
Disclaimer: The content on bestcanadianstocks.ca is for informational and entertainment purposes only and does not constitute financial advice. Past performance is not indicative of future results. Always consult a qualified financial advisor before making investment decisions. US payroll, unemployment, earnings and participation figures are from the Bureau of Labor Statistics Employment Situation for September 2026, released October 2, 2026, and confirmed against the BLS public data API; BLS flags the September and August payroll levels preliminary. Confidence intervals are from that release’s own Technical Note. The federal funds range is from the Federal Reserve’s open market operations table, and US Treasury par yields are from the Treasury’s daily yield curve. Intraday US yield readings are the CBOE 5-year, 10-year and 30-year Treasury yield indices from Yahoo Finance one-minute data on October 2, 2026, at the times given in the text; they are index readings, not Treasury par yields. Canadian figures are from the Bank of Canada Valet service and from Montreal Exchange one-month CORRA futures settlement prices for October 2, 2026, and the implied overnight rate path is our own arithmetic on those settlements, net of a CORRA-to-target basis we measured over September 2026 across that month’s calendar days, carrying the last fix forward. The contract itself settles to the compounded daily CORRA over the contract month, per the Montreal Exchange contract specification. Canadian government bond yields are the Bank’s latest published observation, October 1, 2026. Index levels are the October 2, 2026 close.
