The Canadian government bonds rallied on Tuesday following weak cues emerging from crude oil prices. The yield on the benchmark 10-year bonds, which moves inversely to its price fell 4.42 pct to 1.470 pct and the yield on the 2-year bonds dipped 4.05 pct to 0.663 pct by 1255 GMT.
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, crude oil prices tumbled by snapping 6-month high as rising production in the Middle East outweighed a decline in U.S. output and a recent slide in the dollar, which has been supporting crude. OPEC supplies rose to 32.64 million barrels per day in April, from 32.47 million barrels per day in March, according to a Reuters survey. That almost matches January's 32.65 million barrel per day, when Indonesia's return to OPEC boosted production to the highest since at least 1997. The International benchmark Brent futures fell 0.59 pct to $45.56 and West Texas Intermediate (WTI) tumbled 0.85 pct to $44.40 by 1225 GMT.
Moreover, February Gross Domestic Product (GDP) shrunk 0.1 pct m/m, beating the market expectation to fall 0.2 pct m/m, it was up 0.6 pct in January. Within goods-producing industries, agriculture fell -1.3%, utilities declined 0.2%, mining and quarrying dropped 0.8%, and manufacturing fell 0.8% in February. Meanwhile, construction rose slightly by 0.1%. Major subcategories within manufacturing declined in the month. In service sectors, wholesale trade dropped sharply by 1.8%, which as countered by retail sales’ strong growth of 1.4% in February.
The markets will now look forward to Bank of Canada Governor Poloz Speaks at 1630 GMT, March exports figure on Wednesday (1800 GMT) and April employment change (1800 GMT).
The material has been provided by InstaForex Company – www.instaforex.com