Canadian Bonds Slump on Tracking Firm Crude, Despite Weak GDP Figure

Canadian Bonds Slump on Tracking Firm Crude, Despite Weak GDP Figure

29 April 2016, 16:05
Roberto Jacobs
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Canadian Bonds Slump on Tracking Firm Crude, Despite Weak GDP Figure

The Canadian government bonds slumped on Friday for second straight day on following strong crude oil prices. The yield on the benchmark 10-year bonds, which moves inversely to its price, moved up 0.40 pct to 1.506 pct and the yield on the 2-year bonds climbed 0.74 pct to 0.682 pct by 1305 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 the crude oil prices touched to 6-month high due to weak dollar and decline in United Sates output. Mainly, a weaker USD normally adds to an ascent in oil costs, since oil is priced in USD. At the point when the dollar debilitates against different other currencies, oil gets to be less expensive to purchase, pushing up demand. The International benchmark Brent futures rose 0.59 pct to $48.06 and West Texas Intermediate (WTI) climbed 0.91 pct to $46.45 by 1130 GMT.

On the other hand, investors did not react to the weak February Gross Domestic Product GDP figure, which shrunk 0.1 pct m/m, beats market expectation to fall 0.2 pct m/m, from up 0.6 pct in January.

On the other hand, the Federal Reserve officials on Wednesday left interest rates unchanged and provided no hint of a hike at the June meeting. Mixed global economic signals and low inflation combined with Brexit uncertainties probably clouding the move. Esther L. George was the lone dissenter, who preferred at this meeting to raise the target range for the federal funds rate to 1/2 to 3/4 percent.

In the statement that followed, the Fed didn’t send any message about when the next increase could come. Fed's cautious stance underscores policymakers' lack of confidence in moving away from extraordinary easy-money policies without undermining the fragile U.S. expansion and knocking the global economy off balance. Policymakers have made room till their June 14-15 gathering to see enough encouraging developments before they act.

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