The Canadian government bonds were trading nearly flat Friday as investors await April employment report. The yield on the benchmark 10-year bonds, which moves inversely to its price stood unchanged at 1.353 pct and the yield on the 2-year bonds rose 1 bps to 0.576 pct by 1100 GMT.
The Canadian employment report is forecasted to show limited gains in the job market with less than 1k new jobs after the massive 40k gain reported in April. Alongside it is anticipated that the unemployment rate will increase to 7.2 pct, from current level of 7.1 pct. On the other hand, the Canada building permits report revealed an overall decrease 7.0 pct m/m for March, below expectations for a 4.4 pct m/m decrease, from up 15.5% m/m increase seen for February. Yesterday, the Canada’s merchandise trade deficit widened to $3.41 billion in March, higher than the market expectation of $1.40 billion deficit, from revised $2.47 billion deficit in February (previous was -$1.91 billion). This was mainly due to weaker exports which dropped to the lowest in more than 2-years. Moreover, March exports declined 4.8 pct to CAD 41 billion (lowest since January 2014), as compared to 6.6 pct in February and shipments fell in 10 of 11 major categories, including a 6 pct fall in motor vehicles and a 5.4 pct drop in metals and non-metallic minerals.
On the other hand, the U.S. payroll data will steal the spotlight, but Canadian data will be the last economic release that could further stabilize the government bonds ahead of next week’s lack of economic data. The April Labour Department employment situation report will be released on Friday (1230 GMT), in which non-farm payrolls is expected to increase 200k, from prior 215k in March. Alongside no change is anticipated in the unemployment rate of 5.0 pct.
The Canadian bonds have been closely following developments in oil markets because of their impact on inflation expectations, which are well below the Bank of Canada's target. Today, the crude oil prices tumbled overnight on profit booking and surging dollar that at least temporarily outweighed output after wildfire in Canada disrupted its oil sands production, while escalating fighting in Libya threatened the North African nation's output. The International benchmark Brent futures fell 0.62 pct to $44.74 and West Texas Intermediate (WTI) dipped 0.56 pct to $ 44.07 by 1045 GMT.
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