Sunday, 10 June 2012

Canadian Bonds End Higher, Outpace U.S. Treasurys In Choppy Trading

Canadian bonds ended higher Friday, paring some of their earlier gains but outperforming U.S. Treasurys in restless, headline-driven trading.
Yields for Canada's two-year bond were at 1.041% Friday, from 1.053% late Thursday. The 10-year bond was yielding 1.809%, from 1.826%, according to electronic trading platform CanDeal.
Yields for the 30-year bond were at 2.367%, from 2.383%.
Bond yields move inversely to bond prices.
"They were trading a little better, but they've given back a little bit," said one Montreal bond trader.
Canadian bonds were able to hold in more effectively than their U.S. counterparts as investors gained confidence in more risk-sensitive assets on expectations that euro zone officials might be able to forge a bailout for Spanish banks over the weekend.
"We lagged on the way up and are obviously outperforming on the way down," the trader said.
There was a an outburst of Canadian economic data after a recent dry spell, with Statistics Canada reporting job growth of 7,700 in April, slightly higher than the consensus forecast of 5,000.
The trade balance for April was deficit of C$367 million, weaker than the expected surplus of C$180 million and the first deficit in six months.
But the data were not far enough from expectations to roil the market significantly.
"In terms of economic data, there was nothing really shocking in one way or another," said David Tulk, chief Canada macro strategist at TD Securities.
Some of the activity on Friday was also attributable to position squaring ahead of the weekend, Mr. Tulk said.
"I feel like we're still in a holding pattern waiting for clarity in Europe ahead of the Greek election on [June 17]," he said.
The market will remain on tenterhooks and will continue to take direction from developments in Europe, the Montreal bond trader said.
"It's a headline-driven market, and that's all. If there's a credible plan that comes out of Europe, then the market will certainly be vulnerable," he said.