Canadian bonds narrowly mixed ahead of inflation data; crude oil in focus

The Canadian government bonds traded narrowly mixed Tuesday as investors await consumer inflation data for July. Moreover, future course in bond prices are likely to be ruled by the movements in the crude oil market.

The yield on the benchmark 10-year bond which moves inversely to its price fell 1/2 basis point to 1.059 percent and the yield on short-term 2-year note jumped ½ basis point to 0.513 percent by 12:00 GMT.

Last week, the Canada Labour Force Survey revealed a net employment decrease of -31.2k in July, against expectations for +10.0k increase, as compared to the -0.7k decrease seen in June. Additionally, the unemployment rate increased to 6.9 percent in July, in line with expectations for a 6.9 percent, from previous 6.8 percent.

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. The crude oil prices edged further above $45 a barrel as forecasts for a drop in US inventories and speculation of producer action to prop up prices countered concern about a supply glut. The International benchmark Brent futures rose 0.31 percent to $45.53 and West Texas Intermediate (WTI) climbed 0.21 percent to $43.11 by 12:00 GMT.

According to Reuters, Canadian stock futures pointed to a higher start for Canada's main stock index on Tuesday as oil prices gained on expectations of a drop in U.S. inventories.

Total U.S. crude inventories were expected to fall by 1 million barrels in weekly reports, although market intelligence firm Genscape has reported a rise of more than 307,000 barrels at the Cushing, Oklahoma U.S. crude delivery hub, traders said to Reuters.

Lastly, markets will remain keen to focus on the upcoming economic data, highlighted by retail sales and consumer inflation.

The S&P/TSX Composite Index September futures were up 0.26 percent at 12:00 GMT.