The inflation data, falling stock markets and firmer US Treasuries all contributed to a mixed tone for Canadian bond prices on Friday. While the CPI data seemed to increase the risk of a rate hike coming sooner than foreseen, analysts said the figures were not sufficient, taken alone, to change expectations that the Bank of Canada will not start to raise interest rates until the second half of the year. The central bank said repeatedly this week that interest rates will eventually rise.
Expectations of interest rate increases typically push bond prices lower because their fixed payments look less attractive in comparison with rising yields on other short-term investments.
"At the end of the day the market is still going to be convinced that if the bank says it is going to tighten, eventually it still will," said Andrew Pyle, senior analyst at Scotia Capital.
The two-year bond fell 7 Canadian cents to C$99.87 to yield 3.064 percent, while the 10-year bond rose 9 Canadian cents to C$106.28 to yield 4.164 percent.
The yield spread between the two-year and 10-year bond moved to 110.0 basis points from 114.6 at the previous close.
The 30-year bond, due 2033, climbed 35 Canadian cents to C$117.85 to yield 4.610 percent. In the United States, the 30-year treasury yielded 4.581 percent.
The three-month when-issued T-bill yielded 2.47 percent, unchanged from the previous close.
The Canadian dollar finished higher against the US currency for a second straight session on Friday. At the end of a volatile week in which the fate of Canada's minority Liberal government was in question, commodity prices see-sawed, and economic data was mixed, the Canadian dollar actually cranked out a rise over the seven days for the first time in three weeks.