Canadian bonds rally on weak consumer inflation, retail sales miss market expectations

The Canadian government bonds rallied Friday after recent data showed that August consumer inflation fell despite forecasts for an uptick. Also, retail sales unexpectedly fell in July, causing investors to become risk-averse.

The yield on the benchmark 10-year bond, which moves inversely to its price, fell 2-1/2 basis points to 1.123 percent, the yield on long-term 30-year note dipped 2 basis points to 1.754 percent and the yield on short-term 2-year bond slid 1/2 basis point to 0.571 percent by 12:50 GMT.

The country's retail sales fell 0.1 percent in July, worse than the market estimate of 0.1 percent increase, as compared to the 0.1 percent decline in the prior month. Core retail sales, excluding automobiles, also fell by a seasonally adjusted 0.1 percent, against market expectations of 0.5 percent rise after a 0.6 percent drop the preceding month that was revised from the original decline of 0.8 percent.

Moreover, Canada’s annual inflation rose 1.8 per cent in August, lower than the market expectations of 2 percent growth, from 2.1 in July as lower fuel prices dragged it to the lower reaches of the Bank of Canada's target range, metonews reported

Statistics Canada's latest reading of the consumer price index was weaker than the 1.3 per cent year-over-year increase in July, as the number neared the fringe of the central bank's ideal range of one to three per cent. Economists had expected inflation to ring in at 1.4 per cent in August, according to Thomson Reuters, they added.

Lastly, Canadian stocks may struggle to continue its winning track Friday morning amid sluggish commodities.

The S&P/TSX Composite Index rose 0.59 percent at the close of the trading session to 14,797.17 on Thursday.