Canadian Bond Prices Rise Amid Foreign Buying and Treasury Auction

Strategic Insights -

Foreign investors continued to show interest in the Canadian bond market yesterday, driving prices higher and narrowing the spread to the US yield curve. The Canada 30-year bond climbed 75 cents to $87.65, while the 10-year spread narrowed to 1.97% from 2.06% the previous day. Market participants are now focusing on today's $1.9-billion 10-year Government of Canada bond auction, which is expected to be closely watched.

Key Takeaways:

  • Canadian bond prices rose yesterday due to foreign buying of long-term bonds and a well-received treasury bill auction.
  • The Canada 30-year bond climbed 75 cents to $87.65, yielding 9.22%.
  • David Marshall, president of North American Economist, attributed the rise in bond prices to a combination of factors, including the liquidity in the system and Andre Oulette's pep talk to foreign investors in Hong Kong.
  • The Canadian market outperformed the US bond market, with the 10-year spread narrowing to 1.97% from 2.06% the previous day.
  • Investors can expect the market to be volatile, with polls from the Quebec referendum potentially affecting bond prices.
  • Yesterday's $5-billion treasury bill auction was well-received, with no spread between high and low bids.
  • The average yield for three-month bills was 5.44%, resulting in the Bank of Canada's bank rate dropping 34 basis points to 5.70%.
  • Market participants are focused on today's $1.9-billion, 10-year Government of Canada bond auction.

Statistics:

  • The Canada 30-year bond price rose by 75 cents to $87.65.
  • The 10-year spread narrowed to 1.97% from 2.06% the previous day.
  • The average yield for three-month bills was 5.44%.
  • The Bank of Canada's bank rate dropped 34 basis points to 5.70%.
  • $1.9-billion worth of 10-year Government of Canada bonds are up for auction today.
  • $6.8-billion (U.S.) of Treasury bills are to be sold in the US bond market today.
  • $7.4-billion worth of bonds mature today.

Sources:

  • David Marshall, president of North American Economist.
  • Andre Oulette's statement in Hong Kong.
  • RBC Dominion Securities.
  • ScotiaMcLeod Bond Indexes.