Canadian bonds rise

23 Jul, 2006

The Canadian bond prices took flight after the inflation data on Friday, sharply outperforming US treasuries and widening the gap between US and Canadian yields. Bonds gave some of their gains as the day progressed and volumes dried up.
While expectations of further rate hikes have eased in recent weeks, the market had - prior to the data - been pricing in a modest chance of another hike.
However, the tame inflation left little doubt that there will be little to prompt the central bank to rethink its rate outlook. "This CPI report is about as unambiguously dovish as they get for the rate outlook," said Doug Porter, deputy chief economist at BMO Capital Markets.
The two-year bond rose 8 Canadian cents to C$99.26 to yield 4.167 percent, while the 10-year bond climbed 28 Canadian cents to C$100.83 to yield 4.385 percent. The yield spread between the two-year and 10-year bond was 21.9 basis points, up from 20.9 basis points at the previous close.
The 30-year bond gained 42 Canadian cents to C$120.05 to yield 4.461 percent. In the United States, the 30-year treasury yielded 5.100 percent. The three-month when-issued T-bill yielded 4.17 percent, down from 4.19 percent at the previous close.

Read Comments