Canadian Bond Market Suffers Losses Amid Negative Rumors

Strategic Insights -

The Canadian bond market experienced significant losses across all maturities on March 2, 1995, after being affected by a series of negative rumors throughout the day. Speculation circulated that a large Japanese government agency would be selling Canadian bonds, causing concern among traders. The situation was further complicated by rumors that Standard & Poor's Corp. would be downgrading its rating on Canada's debt. Additionally, the weak Canadian dollar and a softer tone in the U.S. Treasury market contributed to the decline.

Key Takeaways:

  • The Canadian bond market suffered losses across all maturities on March 2, 1995, due to negative rumors.
  • Speculation about a large Japanese government agency selling Canadian bonds and a rumored downgrading of Canada's debt rating by Standard & Poor's Corp. contributed to the decline.
  • The weak Canadian dollar and a softer tone in the U.S. Treasury market also had a negative impact on the market.
  • The benchmark 8-per-cent Canada bond due 2023 fell by 55 cents to 91.0, yielding 8.87 per cent at the close of trading.
  • The bellwether 7.62-per-cent, 30-year U.S. bond was down 12/32 to 101 22/32, yielding 7.48 per cent.
  • Aeltus Investment Management Inc.'s vice-president, Hugh Whelan, attributed the market's weakness to mixed economic data and a loss of momentum in the recent buying frenzy.
  • The U.S. National Association of Purchasing Management's February report showed a composite index falling to 54.5 per cent from 57.9 per cent the previous month.
  • CANADIAN BONDS Provided by RBC Dominion Securities listed selected quotations with changes since the previous day on actively traded bond issues.

Statistics:

  • The index close for the Scotia McLeod Indexes was 233.57-0.31, with a yield change of -0.31 and a 52-week high of 35.29 and a low of 15.83.
  • The universe close for the Scotia McLeod Indexes was 250.45-0.52, with a yield change of -0.52 and a 52-week high of 53.29 and a low of 26.21.

Sources:

  • Globe and Mail
  • RBC Dominion Securities (Provided by)
  • Scotia McLeod Indexes