Canadian bond prices rise

The Canadian bond prices ended higher on Friday after moving sharply in response to the heavy dose of economic data. Prices initially surged on the weak jobs data, then retreated as the Institute for Supply Management's data reignited rate hike worries. But retreating stock markets and a refocusing of attention on the weak job numbers sent prices up again through the afternoon as bond traders concluded the pace of US rate hikes would stay steady, rather than accelerate. "The headline number, what it did do, is discount the possibility of a 50 basis point tightening by the Fed at the next couple of meetings," said Shooshan Danagoulian, an economist at IDEAglobal.
"This has taken a lot of the downward pressure out of the bond markets, and allowed them to launch a rally." The Fed has raised rates seven straight times. The Bank of Canada, in contrast, has left its overnight rate unchanged after raising it twice last fall.
Worries about the negative economic impact of the strong Canadian dollar have kept the central bank on hold, but some expect it will resume tightening around mid-year. Canadian jobs data for March, which will be released next Friday, could have a significant impact on rate hike expectations.
The two-year bond gained five Canadian cents to C$99.49 to yield 3.244 percent, while the ten-year bond rose 18 Canadian cents to C$105.31 to yield 4.292 percent.
The yield spread between the two- and 10-year bonds moved to 105.0 basis points from 104.7 basis points.
The 30-year bond, due 2029, advanced 41 Canadian cents to C$116.46 to yield 4.691 percent. In the United States, the 30-year treasury yielded 4.723 percent.
The three-month when-issued T-bill yielded 2.55 percent, down from 2.56 percent at the previous close.
The Canadian dollar weakened on Friday, initially rising on a weak a US jobs report, but then lagging behind a greenback that surged after US manufacturing data pointed to higher prices and focused attention on rising interest rates.
The currency finished at C$1.2151 to the US dollar, or 82.30 US cents, down from C$1.2096 to the US dollar, or 82.67 US cents, at Thursday's close.