The Canadian government bonds slumped Tuesday following weakness in U.S. debt market. Also, doubts over OPEC ministerial gathering, in which oil producing countries are expected to strike an agreement on output cut, limited the growth in bond yields.
The yield on the benchmark 10-year bond, which moves inversely to its price, rose 1-1/2 basis points to 1.54 percent and the yield on short-term 2-year bond bounced 1 basis point to 0.67 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 fell on worries that the OPEC will be able to cut production output cut during a meeting on Wednesday. The International benchmark Brent futures fell 2.68 percent to $47.88 and West Texas Intermediate (WTI) dipped 2.63 percent to $45.84 by 12:40 GMT.
The Organization of the Petroleum Exporting Countries (OPEC) is meeting officially in Vienna on Wednesday to discuss a planned production cut in an effort to curb overproduction that has dogged markets and more than halved prices since 2014, Reuters reported.
With a high degree of uncertainty going into the last 24 hours before the meeting, oil price volatility is expected to be high. There remains disagreement among OPEC-members over which producers should cut by how much, and a plan for non-OPEC oil giant Russia to participate has so far also failed, they added.
Lastly, investors will remain keen to focus on the upcoming economic data, highlighted by Q3 GDP and November unemployment change.
Lastly, Canadian stocks may struggle to recover its winning track Tuesday morning amid sluggish commodities.
The S&P/TSX Composite Index closed down 0.40 percent at 15,015.36 on Monday. While at 12:00 GMT, the FxWirePro's Hourly Canadian Dollar Strength Index stood neutral at -12.61 (lower than -75 represents bearish trend).
