The Canadian domestic bond prices jumped sharply on Friday, as the US jobs news eased expectations of US interest rate increases.
The Canadian bond market always tends focus more on US employment numbers than Canadian ones, said Guatieri.
Next week, the market will watch for speeches by Canadian central bankers, including Governor David Dodge, and for testimony by Fed Chairman Alan Greenspan.
As well, a large supply of US Treasuries will be auctioned, which could depress prices in both Canada and the United States.
The two-year bond gained 15 Canadian cents to C$100.83 to yield 2.524 percent, while the 10-year bond rose 69 Canadian cents to C$105.95 to yield 4.460 percent.
The yield spread between the two-year and 10-year bond moved to 193.6 basis points from 193.9 at the previous close.
The 30-year bond, due 2029, jumped C$1.10 to C$109.05 to yield 5.108 percent. In the United States, the 30-year treasury yielded 4.922 percent.
The three-month when-issued T-bill yielded 2.25 percent, down from 2.26 percent from the previous close.
The Canadian dollar shot higher against the greenback on Friday as news that the Canadian economy produced fewer jobs than expected in January was overshadowed by a much gloomier US employment report.
The currency finished at C$1.3270 to the U.S dollar, or 75.36 US cents, up from C$1.3384 to the US dollar, or 74.72 US cents, at Thursday's close.
The currency initially fell as low as C$1.3407 after Statistics Canada said Canada's unemployment rate in January held steady at 7.4 percent, Just 14,900 jobs were created, lower than the 20,000 expected by analysts.
However, the currency changed course as news that the US economy created only 112,000 jobs during the month, compared to expectations of 150,000, sent the greenback reeling.
"The reports this morning suggest that employment growth is relatively stronger in Canada than in the US in the new year," said Sal Guatieri, senior economist at Bank of Montreal.
Analysts said the Canadian report was not all negative.
"The breakdown was actually quite healthy, because the bulk of the gains in jobs were in full-time jobs, as opposed to the part-time component," said George Davis, director of global research at RBC Capital Markets.
The weak US figures appeared to ease the chance that the US Federal Reserve will raise rates any time soon, but analysts said the market was also nervous ahead of the meeting of Group of Seven finance ministers this weekend in Florida.
Currency markets are curious to see if the G7 will issue a firm statement to halt the greenback's retreat, and many expect this will not be the case.
"If the G7 comes out with the same type of story that they did in September, which is what we expect, I think as you head into next week you're probably going to see the on-balance risks tilted more toward US dollar weakness," said Davis.
The September communiqué called for more flexible currency regimes.
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