Canadian Bond Market Experiences Uneventful Session, Contrasts with Sizzling Market the Day Before

Strategic Insights -

The Canadian bond market had a tranquil session on May 18, 1994, with bond prices showing minimal movement and few significant gains or losses. In contrast, the market had been marked by significant price increases the previous day, with some bond prices rising as high as $1.90. Yesterday's session saw the 8-per-cent Canada bond due June 1, 2023, ease 15 cents to 95.3 cents, increasing its yield to 8.44 per cent from 8.42 per cent.

The market was quiet, with traders taking the opportunity to catch up on paperwork, and economists were left to sift through the raft of economic statistics released, including the consumer price index. The index showed a 0.2 per cent increase in April from the same period in the previous year, which was less than the expected 0.3 per cent. The auction of $2.2-billion of five-year Canada bonds also failed to generate much excitement, with the bid-to-cover ratio coming in at 2.2 to one.

Key Takeaways:

  • The Canadian bond market had a relatively quiet session on May 18, 1994, with few significant gains or losses, contrasting with the market's more active performance the previous day.
  • The 8-per-cent Canada bond due June 1, 2023, lost 15 cents, increasing its yield to 8.44 per cent from 8.42 per cent.
  • The consumer price index showed a 0.2 per cent increase in April from the same period in the previous year, which was less than the expected 0.3 per cent.
  • The auction of $2.2-billion of five-year Canada bonds generated a bid-to-cover ratio of 2.2 to one, which was viewed as commendable given market concerns prior to the auction.
  • Canadian market players appear to be cautiously approaching the market, with the overall session being described as "uneventful" by Andrew Pyle, chief Canadian economist for MMS International.

Statistics:

  • The consumer price index showed a 0.2 per cent increase in April from the same period in the previous year.
  • The auction of $2.2-billion of five-year Canada bonds generated a bid-to-cover ratio of 2.2 to one.
  • The 8-per-cent Canada bond due June 1, 2023, had a yield of 8.44 per cent after losing 15 cents on May 18, 1994.
  • Bond prices had little movement on May 18, 1994, compared to the previous day's significant gains.

Sources:

  • RBC Dominion Securities
  • MMS International
  • Canadian government bond market data
  • Selected quotations from Canadian bond market on May 18, 1994