Canadian bonds sag following rally in crude oil prices; 10-year yields highest since June last year

The Canadian bonds slumped Monday following a landmark deal by non-OPEC producers to lower production for the first time in 15 years. Also, investors await the Federal Reserve’s last monetary policy decision for 2016, which is scheduled to be released on Wednesday by 19:00 GMT.

The yield on the benchmark 10-year bond, which moves inversely to its price, rose 3-1/2 basis points to 1.76 percent, the yield on long-term 30-year Treasury also jumped 2-1/2 basis points to 2.36 percent and the yield on short-term 2-year bond bounced 1-1/2 basis points to 0.75 percent by 12:40 GMT.

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. Crude oil prices jumped more than 4 percent after OPEC and non-OPEC countries agreed to cut production for the first time since 2001. The International benchmark Brent futures rose 5.14 percent to $57.12 and West Texas Intermediate (WTI) climbed 5.22 percent to $54.18 by 12:10 GMT.

Lastly, Canadian stocks are set to open a stronger session on Monday, as rallying oil prices could drive gains in the energy sector.

The S&P/TSX Composite Index rose 0.11 percent to 15,312.20 at the close of the trading session on Friday. While at 12:00 GMT, the FxWirePro's Hourly Canadian Dollar Strength Index stood neutral at +66.62 (higher than +75 represents bullish trend).