Canadian bonds prices finish weaker

The Canadian bond prices weakened across the board on Friday, as a lack of economic news left the market to wilt under the prospects of interest rate hikes on both sides of the border.
Expectations that rates are soon to rise - the US Federal Reserve is expected to increase its funds rate later this month, while the Bank of Canada is seen boosting its overnight rate in September - has dragged prices lower for nearly three months.
Despite improving economic indicators, Canada's central bank has sounded somewhat dovish in recent statements, even as it has raised its economic outlook for the economy.
Next Tuesday's domestic May inflation data will be watched closely by the market to see if growing price pressures could force the central bank to act quickly. "No question, it will have influence, because it is the number that Bank of Canada Governor, David Dodge is looking at, so the markets are looking at it as well," said Spitz.
The two-year bond fell 4 Canadian cents to C$99.27 to yield 3.391 percent, while the 10-year bond slipped 27 Canadian cents to C$101.78 to yield 5.000 percent.
The yield spread between the two-year and 10-year bond widened to 160.9 basis points from 159.2 basis points at the previous close.
The 30-year bond, due 2029, retreated 45 Canadian cents to C$104.10 to yield 5.447 percent. In the United States, the 30-year treasury yielded 5.378 percent.
The three-month when-issued T-bill yielded 2.04 percent, up from 2.03 percent at previous close.
The Canadian dollar jumped to its highest point in a week on Friday, as a record-high US current account gap dragged down the greenback against a broad range of currencies.
The currency finished at C$1.3635 to the US dollar, or 73.34 US cents, up from C$1.3723, or 72.87 US cents, at Thursday's close.
"Without a doubt, the current account deficit was the catalyst for US dollar sales across the board," said Jack Spitz, director of foreign exchange at National Bank of Canada.
"I think it's less a Canada story than it is a US dollar story ... and the Canadian dollar has effectively retained its value on the crosses."
The US first-quarter current account deficit widened to $144.9 billion, topping economists' forecasts for a $141 billion shortfall.
The big US deficit - the broadest measure of the country's global trade - has been a persistent weight on the US dollar over the last two years.
The quick fall of the greenback pushed the Canadian dollar past key technical levels, quickening its appreciation versus its US neighbour.