Elevated Bond Yields Cap the TSX at 35,713.26

Canada's S&P/TSX Composite Index opened Friday up 6.9 points at 35,713.26, leaving it down 93.29 points or 0.26% on the week as energy shares fell 1.3% and traders priced a 65% chance of a Bank of Canada rate hike of at least 25 basis points in October.

Canada's benchmark equity index went almost nowhere at the opening of Friday's session, a fitting end to a week in which the story was not stocks at all but bonds. The S&P/TSX Composite Index inched forward 6.9 points to 35,713.26 in early trade, leaving it 93.29 points — or 0.26% — lower over the week to that point.

The flatness masked a genuine split beneath the surface. Seven of the index's 12 subgroups were higher in the first hour, led by financials at plus 0.8%, consumer discretionary at plus 0.7% and real estate at plus 0.2%. Among the five decliners, energy was the heaviest drag at minus 1.3%, with telecoms and information technology each off 0.9%. The junior market moved in the same muted direction: the TSX Venture Exchange added 2.31 points to 916.22, still down 6.85 points, or 0.7%, on the week.

A rate-hike bet, not a rate-cut bet

The most consequential number in Friday's picture was not on the tape. Traders were assigning a 65% probability that the Bank of Canada raises its policy rate by at least 25 basis points at its October meeting to lean against inflation. A basis point is one hundredth of a percentage point, so 25 of them is a quarter-point move.

That is a meaningfully different setup from the one Canadian equity investors spent much of the past two years positioned for. A market that expects cuts treats every soft data print as fuel; a market that expects hikes treats every firm print as a cost. With roughly two-thirds odds on tightening, the discount rate applied to future Canadian corporate earnings is drifting the wrong way for anything long-duration — which is precisely the profile of the technology and telecom names that lagged on Friday.

Telecoms are the cleanest illustration. They carry heavy debt loads against regulated, slow-growing cash flows, and they compete directly with government bonds for income-seeking capital. When yields climb, both sides of that equation turn hostile at once. A 0.9% decline in a single morning is not dramatic on its own, but it is consistent with how that group behaves when the rate path steepens.

Why financials led while energy sank

The 0.8% gain in financials is the mirror image. Banks and insurers are among the few sectors that can find something to like in higher rates: wider net interest margins on lending books, better reinvestment yields on insurance float. Given how large a share of the TSX the big lenders represent, that 0.8% did a great deal of the work holding the index above water.

Energy pulled the other way, down 1.3% as crude eased. The TSX's unusual construction — a heavy weighting in banks and producers, relatively thin exposure to megacap technology — means the index often trades as a tug-of-war between those two blocs rather than as a single directional bet. Friday was a textbook version: financials up, energy down, composite essentially unchanged.

Small gains in precious metals offered partial offset to the oil weakness, and the loonie firmed fractionally, up 0.04 cents to 70.73 cents US. That is a rounding error in currency terms, but the direction fits the rate story: a central bank leaning toward tightening is, all else equal, currency-supportive.

Details of the session's opening moves were reported by Baystreet.

South of the border, a stronger finish than the open suggested

U.S. equities opened Friday with the same hesitancy, capping a volatile week in which a surge in Treasury yields rippled through every corner of the financial system. The Dow Jones Industrial Average slipped 2.18 points to 51,347.86 early on, and the S&P 500 was 6.56 points lower.

By the closing bell the tone had improved markedly. Using the exchange-traded funds that track the major U.S. benchmarks, as of the last trade at 20:00 GMT on Friday, Sept. 25, 2026:

• SPDR S&P 500 ETF Trust (NYSEARCA: SPY) finished at $771.35, up 0.54% from the prior close of $767.18, within a day range of $766.29 to $772.28.
• Invesco QQQ Trust (NASDAQ: QQQ), which tracks the Nasdaq 100, closed at $744.50, up 0.46% from $741.10, ranging between $739.64 and $745.91.
• SPDR Dow Jones Industrial Average ETF Trust (NYSEARCA: DIA) ended at $517.49, up 0.94% from $512.68, after trading from $512.59 to $517.92.

The gap between the sluggish open and the firmer close matters for reading the week. The Dow proxy's 0.94% advance outpaced both the broad-market and tech-heavy gauges, which is the shape of a session in which cyclical and value names carried the load rather than growth. That is the same rotation Canadian investors saw in miniature — financials leading, technology lagging — and it is the signature of a market repricing rates rather than repricing earnings.

What to watch from here

The October Bank of Canada decision is now the single largest scheduled risk on the Canadian calendar. With the probability of a hike of at least a quarter point sitting at 65%, the market has done most of the positioning work already — which means the more violent reaction would come from a hold, not a hike. Anything that shifts those odds in either direction should show up first in the loonie and in rate-sensitive TSX sectors before it touches the composite.

Three specific things worth tracking:

• The financials-versus-energy spread. If banks keep outperforming while producers sag, the TSX can grind sideways for a long time without telling investors much about underlying growth.
• Treasury yields. Canadian long rates rarely decouple from U.S. ones for long. The yield surge that defined this week is an imported variable as much as a domestic one.
• The Venture index. Down 0.7% on the week against the composite's 0.26% slide, the junior board is behaving the way risk appetite normally does when financing costs rise — it thins out first.

None of this makes a 6.9-point gain interesting on its own. But a benchmark that cannot move despite its largest sector rising 0.8% is telling you where the resistance sits: in the bond market, not the equity one.

Key facts

• S&P/TSX Composite: 35,713.26, up 6.9 points Friday; down 93.29 points (0.26%) on the week
• October BoC hike odds: 65% chance of at least a 25-basis-point increase
• SPY (NYSEARCA): $771.35, +0.54%, as of 20:00 GMT Fri, Sept. 25, 2026
• TSX sector split: Financials +0.8%, consumer discretionary +0.7%; energy -1.3%, telecom and IT -0.9% each

Frequently asked questions

How did the TSX perform on Friday?

Canada's S&P/TSX Composite Index rose 6.9 points to 35,713.26 at the start of Friday's session, an essentially flat move. Over the week to that point the index had fallen 93.29 points, or 0.26%. Seven of its 12 subgroups were higher in the first hour of trading, though energy fell 1.3%.

Why are Canadian investors watching the Bank of Canada's October meeting?

Traders were assigning a 65% probability that the Bank of Canada raises its policy rate by at least 25 basis points at the October meeting to combat inflation. That expectation reverses the easing bias equity markets had grown used to, raising the discount rate on future corporate earnings and pressuring rate-sensitive sectors such as telecoms and technology.

Which TSX sectors gained and which fell?

Financials led with a 0.8% gain, followed by consumer discretionary at 0.7% and real estate at 0.2%. On the losing side, energy dropped 1.3% as oil prices eased, while telecoms and information technology each fell 0.9%. Seven of the 12 subgroups were in positive territory during the first hour.

How did U.S. markets close on the same day?

U.S. benchmarks opened softly but finished higher. As of the last trade at 20:00 GMT on Sept. 25, 2026, the S&P 500 ETF closed at $771.35, up 0.54%; the Nasdaq 100 ETF at $744.50, up 0.46%; and the Dow ETF at $517.49, up 0.94%. The Dow's outperformance points to cyclical leadership.

What happened to the Canadian dollar?

The loonie edged up 0.04 cents to 70.73 cents US. The move is marginal, but the direction is consistent with a central bank leaning toward tightening: higher expected policy rates typically support a currency by widening its yield advantage over other major currencies.

Why do higher bond yields hurt telecom and technology stocks?

Both groups are long-duration in market terms, meaning much of their value sits in cash flows far in the future. Higher yields reduce the present value of those distant cash flows. Telecoms carry an additional burden: heavy debt loads to refinance and income-focused shareholders who can switch to government bonds when yields rise.

Sources

• TSX Gains Little to Start Week’s Last Session — Baystreet