Canadian bonds nearly flat ahead of BoC policy decision; change in interest rate seems unlikely

The Canadian bonds traded nearly flat on Tuesday as investors awaited the last monetary policy meeting of 2016 from the Bank of Canada, which is scheduled to be released on December 7.

The yield on the benchmark 10-year bond, which moves inversely to its price, hovered around 1.62 percent mark, the yield on long-term 30-year Treasury stood flat at 2.23 percent and the yield on short-term 2-year bond remained unchanged at 0.73 percent by 12:30 GMT.

The Bank of Canada is expected to maintain its benchmark interest rate unchanged at 0.5 percent on Wednesday, December 7. Also, the central bank will keep its powder dry in near-term as further rate cut would put housing policies at odds.

Moreover, 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 chased in profit after a long rally. The International benchmark Brent futures fell 1 percent to $54.40 and West Texas Intermediate (WTI) dipped 1.39 percent to $51.07 by 12:30 GMT.

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

The S&P/TSX Composite Index rose 0.28 percent to 15,095.17 at the close of the trading session on Monday. While at 12:00 GMT, the FxWirePro's Hourly Canadian Dollar Strength Index stood neutral at +66.46 (higher than +75 represents bullish trend).