Canadian Bonds Plunge As Crude Hits Record 6-Month High

Canadian Bonds Plunge As Crude Hits Record 6-Month High

16 May 2016, 17:07
Roberto Jacobs
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Canadian Bonds Plunge As Crude Hits Record 6-Month High

The Canadian government bonds plunged on Monday as investors cooled on safe-haven assets amid gains in equities and oil. The yield on the benchmark 10-year bonds, which moves inversely to its price rose 2bps to 1.294 pct and the yield on the 2-year bonds jumped 2bps to 0.570 pct by 1245 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 jumped more than 2 pct after long-time bear Goldman Sachs said the market had ended almost 2-years of oversupply following global oil disruptions and flipped to a deficit. Reuters in its recent report said that supply disruptions from Nigeria, Venezuela, the United States and China triggered a U-turn in the oil outlook of Goldman Sachs, which long warned of overflowing storage and another looming crash in prices. Venezuela's oil production has already fallen by at least 188,000 bpd since the start of the year as PDVSA struggles to make the investment needed to keep output steady. In the United States, crude production has fallen to 8.8 million bpd, 8.4 percent below 2015 peaks as the sector suffers a wave of bankruptcies. And in China, output fell 5.6 percent to 4.04 million bpd in April, compared with the same time last year. The International benchmark Brent futures rose 2.09 pct to $48.83 and West Texas Intermediate (WTI) jumped 2.16 pct to $47.21 by 1230 GMT.

The markets will now focus on this week’s April core CPI and March retail sales (1230 GMT) on Friday. Meanwhile, the Canada's main stock index was set to open higher as oil prices jumped due to output disruptions in Nigeria and as Goldman Sachs said the market had ended almost two years of oversupply and was now in deficit. June futures on the S&P TSX index were up 0.29 pct at 11:30 GMT.

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