An unexpected piece of news has just come out of Canada—the market sentiment has completely shifted.

Now, almost all traders believe that the Bank of Canada will restart its rate-hiking cycle before October 2026. This is a bit surreal, considering that just a few months ago everyone was still discussing how many times rates would be cut next year.

The turning point came out of nowhere: November’s employment data exploded. The unemployment rate dropped significantly, and the number of new jobs far exceeded forecasts. With the economy heating up, the central bank is under pressure—if inflation picks up, they’ll probably have to dig those tightening tools out of the toolbox again.

The bond market’s reaction was the most direct: government bonds faced a wave of selling, and yields shot up. To put it simply, this trend is a signal—capital is pricing in expectations of “more expensive money,” and the atmosphere for tightening trades is getting stronger again.