The Canadian bond prices rose on the long end on Friday, helped by a late-day stock selloff. The bond prices fluctuated through much of the session, eventually closing higher as market players digested economic data and set their positions on the last trading day of the third quarter.
Analysts said long-dated bonds were helped by a late stock market selloff, while short-end debt was held back by expectations that the Bank of Canada will raise interest rates in October.
Canadian debt sharply outperformed US treasuries, which fell hard as rising inflation and an improvement in Midwest business conditions firmed expectations that the US Federal Reserve will keep raising interest rates.
The weaker US debt widened US-Canada yield spreads.
Next week, attention will focus on a Thursday speech by Bank of Canada Deputy Governor Tiff Macklem and the release of September jobs data on Friday. Both events could have an impact on interest rate expectations. The Bank of Canada raised its overnight rate by one-quarter of a percentage point earlier this month, its first increase in nearly a year.
The two-year bond slipped 1 Canadian cent to C$98.75 to yield 3.356 percent, while the 10-year bond rose 8 Canadian cents to C$104.26 to yield 3.964 percent.
The yield spread between the two-year and 10-year bond moved to 60.8 basis points from 62.2 at the previous close. The 30-year bond increased 42 Canadian cents to C$113.87 to yield 4.203 percent. In the United States, the 30-year treasury yielded 4.566 percent.
The three-month when-issued T-bill yielded 2.93 percent, down from 2.94 percent at the previous close. The Canadian dollar soared to a 14-year high against the greenback on Friday and also hit new peaks against several other major currencies as momentum players bet on a steady economy, more interest rate hikes and further investment in Canada's oil patch.
The currency finished at C$1.1627 to the US dollar, or 86.01 US cents, up from C$1.1712 to the US dollar, or 85.38 US cents, at Thursday's close.