Canadian government bond yields closed out the year on Friday with a modest decline in quiet trade, but analysts said the year ahead should see them climb, particularly in the second half of the 2011. Market watchers are mixed about the timing of future interest rate hikes from the Bank of Canada.
Among the 12 Canadian primary dealers - those that deal directly with the central bank to help it carry out monetary policy - the majority forecast rate increases in the second half of the year, with a median prediction for the first hike in July. The two-year bond rose 9 Canadian cents to yield 1.678 percent, while the 10-year bond yielded 3.117 percent. Most domestic bonds outperformed their US counterparts, except in the belly of the curve.