The Canada Revenue Agency confirmed this month that the prescribed rate on family loans will hold at 3 per cent for the third quarter of 2026, running July 1 through September 30. It is the fifth consecutive quarter at that level, and the rate Canadian households use to set up income-splitting loans with a spouse, common-law partner, or family trust has now sat at 3 per cent since the third quarter of 2025.
The rate is not discretionary. Section 4301 of the Income Tax Regulations sets it as the simple average yield on three-month Government of Canada Treasury bills auctioned in the first month of the preceding quarter, rounded up to the next whole percentage point. The Q3 rate was set from April's auctions, which averaged 2.305 per cent and rounded up to 3. The Q4 rate, covering October through December, will be set from bills auctioned this month.
Why the Bond Selloff Has Not Touched the Number That Matters
Government of Canada bond yields have climbed through 2026 as the conflict in the Middle East pushes energy costs into the Bank of Canada's inflation projections. The 5-year yield has risen from 2.79 per cent in early March to 3.15 per cent as of July 15, a move of 36 basis points. The 10-year has climbed 30 basis points over the same stretch, touching a two-month high of 3.57 per cent on July 14 before easing to 3.54 per cent. Advisors watching those moves might reasonably expect the prescribed rate to be next.
The three-month Treasury bill tells a different story. It stood at 2.21 per cent in early March and was trading at 2.25 per cent as of July 7, a move of just 4 basis points across more than four months. The reason is structural, not incidental: 3-month bills price almost entirely off the Bank of Canada's overnight rate, which has held at 2.25 per cent through six consecutive decisions including the July 15 hold. The energy-driven risk premium showing up in 5-year and 10-year yields reflects a market view about the path of future inflation. It has almost no channel through which to move an instrument that matures before most of that uncertainty resolves.
The three curves have moved at three different speeds since March, and the gap between the anchored short end and the two longer maturities is the entire story behind why the prescribed rate has stayed put while advisors keep asking whether it is about to move.
The 3-month bill would need to average above 3.00 per cent across July's auctions to push the fourth-quarter prescribed rate to 4 per cent. Dates shown reflect available auction and market data rather than a continuous daily series.
What the Fourth Quarter Rate Actually Requires
For the prescribed rate to rise to 4 per cent in the fourth quarter, the average yield on Treasury bills auctioned across July would need to exceed 3.00 per cent, a level the 3-month bill has not approached in 2026. With most of July's auctions behind and the yield still in the 2.2 to 2.3 per cent range, a jump to 4 per cent for October through December would require a sudden and substantial reassessment of the Bank of Canada's near-term path, something the Bank's own July 15 hold argues against. A sixth consecutive quarter at 3 per cent is the more probable outcome, not a certainty but the direction the data points toward.
For CCPC owners and trust structures using prescribed-rate loans to split investment income, the rate that matters is the one in effect when the loan is established, and it locks in for the life of that loan provided the annual interest is paid by January 30 of the following year. The bond market's headline story this year has been the sharp move higher in longer yields. The instrument that actually governs prescribed-rate loan planning has told a much quieter story, and it is worth distinguishing the two when a client asks whether the window on this strategy is closing.