Canadian bonds down following firm crude oil prices, Brexit referendum closely eyed

The Canadian bonds slid on Monday, following rally in crude oil prices. The yield on the benchmark 10-year Treasury note which moves inversely to its price rose more than 6 basis points to 1.183 percent and the yield on the short-term 2-year bonds also jumped 3 basis points to 0.548 percent by 13:00 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. The crude oil prices jumped more than 1 percent due to weaker US dollar and easing fears of a UK exit from the European Union. The International benchmark Brent futures rose 1.89 percent to $50.11 and West Texas Intermediate (WTI) climbed 2 percent to $48.94 by 12:45 GMT.

Moreover, a recent opinion poll showed that British voters have swung and now started to favour remaining in the European Union. A YouGov poll for The Sunday Times newspaper published at the weekend showed 44 percent supported remaining in the EU, as compared to 43 percent who supported leaving, based on interviews conducted on Thursday and Friday. Two other polls also showed public opinion tilted towards the 'Remain' camp after the killing of a UK politician Jo Cox on last Thursday.

A British member of parliament, Jo Cox, was shot dead on last Thursday, resulting in the suspension of campaigning for this week’s referendum on the country's EU membership. Cox was one of the members of parliament advocating continued British membership.

On Friday, the Canada CPI report revealed a +0.4 percent m/m (+1.5 percent y/y) reading for May, just below market expectations for a +0.5 percent m/m (+1.6 percent y/y) reading, as compared to the unrevised +0.3 percent m/m (+1.7 percent y/y) result seen in April. Meanwhile, the BoC core measure increased +0.3 percent m/m (+2.1 percent y/y) in May, versus the unrevised +0.2 percent m/m (+2.2 percent y/y) reading seen in March, in line with market expectations for a +0.2 percent m/m (+2.2 percent y/y) result.

Lastly, Canadian stocks may rise along with global equities Monday morning amid hopes the UK will reject a proposal to leave the European Union.