Canadian bonds gain on weak energy prices; Yellen, Poloz’s speech in focus

The Canadian bonds gained Wednesday after energy oil prices fell following a jump in U.S. crude inventories. Also, investors await the Federal Reserve’s last monetary policy decision for 2016, which is scheduled to be released on Wednesday by 19:00 GMT.

The yield on the benchmark 10-year bond, which moves inversely to its price, fell 3 basis points to 1.72 percent, the yield on long-term 30-year Treasury dipped 3 basis points to 2.34 percent and the yield on short-term 2-year bond slid 1 basis point to 0.76 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 declined as investors cashed in profits after U.S. inventories rose by 4.68 million barrels last week; the industry-funded American Petroleum Institute was said to report. The International benchmark Brent futures fell 1 percent to $55.19 and West Texas Intermediate (WTI) dipped 1.11 percent to $52.39.

Moreover, markets will remain focused on the Federal Reserve last monetary policy decision for 2016, which is scheduled to be released on December 14. The Federal Reserve is expected to increase the target range of the key interest rate by 25 basis points to 0.50-0.75 percent, with a unanimous decision. Little change to the statement, though the Committee is likely to acknowledge that market-based measures of inflation compensation have risen further.

Also, the market will remain keen to focus on the upcoming Bank of Canada (BoC) Governor Stephen Poloz’s speech (scheduled for Thursday at 16:15 GMT), in an attempt to estimate the BoC's most likely policy step.

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

The S&P/TSX Composite Index rose 0.64 percent to 15,385.27 at the close of the trading session on Tuesday. While at 12:00 GMT, the FxWirePro's Hourly Canadian Dollar Strength Index stood neutral at -46.97 (lower than -75 represents a bearish trend).