Canadian bonds slump on tracking firm crude

The Canadian government bonds slumped on Thursday on following strong crude oil prices. The yield on the benchmark 10-year bonds, which moves inversely to its price, moved up 0.40 pct to 1.506 pct and the yield on the 2-year bonds climbed 0.74 pct to 0.682 pct by 1305 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. Today, crude oil prices continue to hover around 2016 high due to weak dollar and WTI was further supported after the American Petroleum Institute (API) reported a draw of almost 1.1 million barrels in U.S. crude inventories a week ago versus markets desires for a 2.4 million-barrel build in a Reuters survey. The International benchmark Brent futures rose 1.58 pct to $45.02 and West Texas Intermediate (WTI) climbed 0.96 pct to $43.05 by 1250 GMT.

On the other hand, the Federal Reserve officials on Wednesday left interest rates unchanged and provided no hint of a hike at the June meeting. Mixed global economic signals and low inflation combined with Brexit uncertainties probably clouding the move. Esther L. George was the lone dissenter, who preferred at this meeting to raise the target range for the federal funds rate to 1/2 to 3/4 percent.

In the statement that followed, the Fed didn’t send any message about when the next increase could come. Fed's cautious stance underscores policymakers' lack of confidence in moving away from extraordinary easy-money policies without undermining the fragile U.S. expansion and knocking the global economy off balance. Policymakers have made room till their June 14-15 gathering to see enough encouraging developments before they act. Moreover, markets will now look forward to February GDP on Friday (1230 GMT).