Canadian bonds sag following recovery in energy prices

The Canadian government bonds slumped Thursday following a recovery crude oil prices. Also, bond prices tracked a retreat in the U.S. Treasuries.

The yield on the benchmark 10-year bond, which moves inversely to its price, rose 4-1/2 basis points to 1.206 percent, the yield on long-term 30-year note climbed 4 basis points to 1.868 percent and the yield on short-term 2-year bond bounced 1-1/2 basis points to 0.575 percent by 12:40 GMT.

The U.S. 10-year Treasury yields hit highest in five months at 1.83 percent after reading stronger than expected recent economic data, which increased bets for the Federal Reserve interest rate hike.

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 recovered from previous losses on fresh buying and concerns over Venezuela's stability. The International benchmark Brent futures rose 0.44 percent to $50.20 and West Texas Intermediate (WTI) jumped 0.05 percent to $49.20 by 12:40 GMT.

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

The S&P/TSX Composite Index fell 0.42 percent at the close of the trading session to 14,807.56 on Wednesday.