Canadian bonds gain on weak employment data

The Canadian government bonds gained Friday after data showed the country’s employment unexpectedly plunged in July. Also, rise in unemployment boosted demand for the safe-haven assets.

The yield on the benchmark 10-year bond which moves inversely to its price fell 1-1/2 basis points to 1.032 percent and the yield on short-term 2-year note dipped nearly 2 basis points to 0.520 percent by 13:00 GMT.

The Canada Labour Force Survey revealed a net employment decrease of -31.2k in July, against expectations for +10.0k increase, as compared to the -0.7k decrease seen in June. Additionally, the unemployment rate increased to 6.9 percent in July, in line with expectations for a 6.9 percent, from previous 6.8 percent.

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 dipped as higher stockpiles weighed on markets. The International benchmark Brent futures fell 0.45 percent to $44.10 and West Texas Intermediate (WTI) rose 0.19 percent to $42.01 by 13:00 GMT.

Last week, the Canada GDP declined 0.6 percent m/m in May (worst month in more than 7 years on Alberta wildfires), consensus was for a 0.4 percent m/m fall, from up 0.1 percent m/m in April.

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

The S&P/TSX Composite Index rose 0.12 percent at the close of the trading session to 14,528.78 on Thursday.