Thursday, 7 June 2012

Canadian Bonds Decline for 4th Day As Sentiment Continues to Lift

Canadian bonds moved lower as an absence of negative news out of Europe and a wave of constructive economic data helped to convince investors to step aside from the safety of fixed income for a fourth-straight session.
Yields for Canada's two-year bond were at 1.069% late Thursday, from 1.054% late Wednesday. The 10-year bond was yielding 1.842%, from 1.803%, according to electronic trading platform CanDeal.
Yields for the 30-year bond were at 2.387% Thursday, from 2.350% late Wednesday.
Bond yields move inversely to bond prices.
After moving to record-low yields last week as heightened worries across Europe led to a broad flight to safety, bonds continued to decline, shrugging off a positive read of Canada's Ivey purchasing managers index and U.S. labor data.
Canadian bonds followed their U.S. counterparts with small gains after Federal Reserve Chairman Ben Bernanke provided testimony to Congress that failed to provide signs that further monetary stimulus would be injected into the financial system.
Those gains were short-lived and bonds registered a decline across the board. Issuance of Canadian provincial bonds that yielded more than their government counterparts also contributed to the sell-off, said Andrew Kelvin, senior fixed income strategist at TD Securities in Toronto.
"I would still characterize this bond market as being positioned defensively," Mr. Kelvin said.
He added that traders weren't taking positions ahead of Canadian labor data that will be released Friday morning, noting that the front-end of the curve would have seen more movement if investors were worried about domestic employment figures.
Canada is expected to report a gain of only 5,000 jobs in May.