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Financial markets

Canadian Bond Prices Drop Ahead of FOMC Meeting

Strategic Insights

— 1 min read

Traders on both sides of the border were reluctant to take major positions ahead of the Federal Open Market Committee's policy-making meeting, resulting in minimal price changes in bond markets. Canadian bond prices dropped between 2 cents and 30 cents, with the 8-per-cent Canada bond due June 1, 2023 falling 25 cents to 88.25, increasing its yield to 9.16 per cent from 9.14 per cent. Experts expect the Fed to opt for a quarter-point rise in the federal funds rate, while others predict the Fed will wait until its Nov. 15 policy-making meeting before undertaking a move.

Key Takeaways:

  • Canadian bond prices dropped between 2 cents and 30 cents, with the 8-per-cent Canada bond due June 1, 2023 falling 25 cents to 88.25.
  • The yield on the 8-per-cent Canada bond due June 1, 2023 increased to 9.16 per cent from 9.14 per cent after the price drop.
  • Experts expect the Federal Reserve to opt for a quarter-point rise in the federal funds rate, while others predict the Fed will wait until its Nov. 15 policy-making meeting before undertaking a move.
  • MMS International believes the Fed will delay its decision until after it has seen September statistics for consumer and producer prices.
  • Rising interest rates reduce the attractiveness of fixed-income securities, with foreigners buying a net $5.77-billion in Canadian bonds in July, the largest net purchase in the past 10 months.
  • The U.S. government bond market also lost ground, with the 7.5-per-cent, 30-year U.S. Treasury easing 12 cents (U.S.) to 96 17/32 to yield 7.79 per cent.

Statistics:

  • Canadian bond prices down 2-30 cents.
  • 8-per-cent Canada bond yield increased to 9.16 per cent.
  • $5.77-billion net purchase of Canadian bonds by foreigners in July.
  • 12 cents (U.S.) drop in 7.5-per-cent, 30-year U.S. Treasury.

Sources:

  • "Bond Market Loses Ground as FOMC Meeting Looms" by [Unknown Source].
  • Selected quotations provided by RBC Dominion Securities.
  • Bond Index provided by ScotiaMcLeod.
  • Benchmark International Bond Index provided by Benchmark International.

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