The Canadian bond prices fell on Friday, hurt by the strong jobs data and the influence of declining US Treasuries. "Initially you had bond yields moving up with the stronger than expected Canadian employment numbers which eliminated the possibility of rate cuts here in Canada," Ferley said. "That upward trend seemed to get abetted by a rise in yields that occurred in the US in the wake of Snow's comments."
Some analysts said the strong jobs data had opened the door for the Bank of Canada to start raising rates again sooner than expected.
The two-year bond dropped 16 Canadian cents to C$100.28 to yield 3.098 percent, while the 10-year bond fell 40 Canadian cents to C$104.88 to yield 4.360 percent. The yield spread between the two-year and 10-year bond moved to 126.5 basis points from 129.9 at the previous close.
The 30-year bond, due 2029, retreated 45 Canadian cents to C$112.50 to yield 4.868 percent. In the United States, the 30-year treasury yielded 4.839 percent.
The three-month when-issued T-bill yielded 2.52 percent, up from 2.48 percent at the previous close.
The Canadian dollar gained slightly on Friday as an early boost from surprisingly strong jobs growth in Canada in December was tempered by comments from the US Treasury that firmed up the greenback.
The Canadian currency finished at C$1.2319 to the US dollar, or 81.18 US cents, up from C$1.2351 to the US dollar, or 80.97 US cents, at Thursday's session close.
The currency got off to a fast start after Statistics Canada said the economy created 33,500 jobs in December, more than twice expectations, while the unemployment rate fell to 7.0 percent from 7.3 percent, a steeper drop than anticipated.
The loonie added to its gains, trading at a session high of 81.77 US cents, as traders initially sold greenbacks after a report showed a smaller-than-expected 157,000 jobs were added to US payrolls in the month.
"Certainly you had a very strong reaction early in the day with the Canada rising and bond yields moving up," said Paul Ferley, assistant chief economist at Bank of Montreal.
"But then developments in the US seemed to dominate more in the afternoon and resulted in Canada giving up some of its initial gains."