The Canadian bond prices ended lower on Friday as talk from the Bank of Canada that the economy will surface from this recession faster than it from previous recessions extended a recent bearish tone toward secure assets like government debt.
In a quarterly economic outlook released on Thursday, the central bank said the Canadian economy will shrink during the first half of 2009 before returning to growth in the third quarter, a scenario several experts considered too rosy.
A slide in the bigger US Treasury market also influenced Canadian bonds. Dealers fled US bonds on concerns about the impact of the large amount of new debt that is expected to be issued in the United States in coming years to fund government programs to stimulate the economy.
"The whole MPR update and the somewhat snappy recovery that they are forecasting have been weighing on the Canadian (bond) market," said Mark Chandler, fixed income strategist at RBC Capital Markets. "At the very long end of the market it's more a perception about supply. Canada was insulated to some degree but it's beginning to work against us as well."
The two-year bond dropped 21 Canadian cents to C$102.70 to yield 1.264 percent, while the 10-year bond fell 63 Canadian cents to C$11.62 to yield 2.826 percent. The 30-year bond shed 85 Canadian cents to C$123.55 to yield 3.658 percent. In the United States, the 30-year Treasury yielded 3.317 percent.