In the third quarter of the year, higher interest rates and U.S. Treasury yields had a significant impact on U.S., Canadian and international equities. Interest rates once again played a key role this quarter, as equities performed poorly. In the U.S., the 10-year Treasury yield reached a 15-year high, prompting a drop in stock prices and lower returns for fixed income. Canadian, U.S. and most international equities saw declines. Bond yields in North America trended higher, as sticky inflation and concerns over supply-and-demand dynamics weighed on fixed income markets. Canadian inflation, now primarily driven by oil prices and rising mortgage interest costs, surprised to the upside. Further rate hikes are unlikely to be as effective against inflation going forward. The U.S. dollar was particularly strong against all major currencies during the quarter, while the Canadian dollar showed modest strength against other currencies.

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