Canadian bond prices rally

The Canadian bond prices rallied immediately after the weak jobs data on Friday, and even further after the release of soft US data, but the gains were handed back and bonds closed just a touch higher.
The initial gains were given back after the market decided that the jobs numbers were unlikely to shift the Bank of Canada's thinking on interest rates, which are currently steady at 4.25 percent.
"People were anticipating at some point we would get a negative print after the exceptional gains of the last six months," said Sal Guatieri, senior economist at BMO Capital Markets. "But for the Bank of Canada, the employment report was really a wash."
Also supporting the bond market was US data that showed retail sales came in weaker than expected, while core producer prices were flat, which together made the chance of a US rate cut more likely.
The two-year bond finished up 4 Canadian cents at C$99.13 to yield 4.197 percent, while the 10-year bond climbed 2 Canadian cents to C$98.59 to yield 4.189 percent.
The yield spread between the two-year and 10-year bond moved to -0.8 basis points from -2.6 at the previous close. The 30-year bond was unchanged at C$124.15 to yield 4.214 percent. In the United States, the 30-year treasury yielded 4.853 percent.
The three-month when-issued T-bill yielded 4.15 percent, down from 4.17 percent at the previous close. The Canadian dollar finished lower versus the US currency on Friday but managed to recoup nearly all the steep losses it suffered early in the session when data showed the economy lost jobs in April.
Canadian bond prices finished just a touch higher despite an early boost from the weak jobs data and soft US data that sparked hopes for a rate cut by the US Federal Reserve.
The Canadian dollar closed at C$1.1122 to the US dollar, or 89.91 US cents, down from C$1.1112, or 89.99 US cents, at Thursday's close. Statistics Canada said the economy lost 5,200 jobs in April, missing average forecasts of an 18,000 job gain. The unemployment rate stayed unchanged at a 33-year low of 6.1 percent.