Canadian bonds gain following weakness in energy prices; Q3 GDP in focus

The Canadian government bonds gained Friday as crude oil prices declined ahead of the OPEC meeting.

The yield on the benchmark 10-year bond, which moves inversely to its price, fell 1-1/2 basis points to 1.57 percent, the yield on long-term 30-year note dipped 1/2 basis point to 2.17 percent and the yield on short-term 2-year bond slid 1/2 basis point to 0.68 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 as investors cashed in profit ahead of next week’s OPEC meeting. Also, strengthening U.S. dollar lent support. The International benchmark Brent futures fell 1.06 percent to $48.48 and West Texas Intermediate (WTI) dipped 1.15 percent to $47.41 by 12:40 GMT.

Moreover, wholesale sales in Canada posted a surprise decline during the month of September, following weakness in demand for machine tools and equipment that disappointed sellers at the start of the fourth quarter.

Canadian wholesale sales declined 1.2 percent in September compared with expectations of a 0.3 percent increase for the month and followed a 0.8 percent gain the previous month, data released by Statistics Canada showed Monday. The annual increase slowed to 2.8 percent while, in volume terms, there was a 2.6 percent annual increase after a 1.5 percent monthly decline.

Lastly, Canadian stocks may struggle to recover its winning track Friday morning amid sluggish commodities.

The S&P/TSX Composite Index fell 0.04 percent at the close of the trading session to 15,075.20 on Thursday. While at 12:00 GMT, the FxWirePro's Hourly Canadian Dollar Strength Index stood neutral at -48.69 (lower than -75 represents bearish trend).