Canadian bonds nearly flat in subdued trade, likely to fall on recovering oil prices

The Canadian government bonds traded nearly flat Thursday, succumbing to thin trading activity during a relatively quiet session that witnessed data of little significance.

The yield on the benchmark 10-year bond, which moves inversely to its price, hovered around 1.18 percent mark, the yield on long-term 30-year note remained steady at 1.82 percent and the yield on short-term 2-year bond slid 1/2 basis point to 0.58 percent by 12:30 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 rebounded after the EIA reported an unexpected weekly inventory drawdown.

The U.S. Energy Information Administration data showed that crude oil inventories dropped by 559,000 barrels, compared to forecasts for a gain of 3.8 million barrels. The International benchmark Brent futures rose 1.05 percent to $46.33 and West Texas Intermediate (WTI) jumped 0.89 percent to $43.97 by 12:30 GMT.

In addition, investors will remain keen to focus on the next week’s August consumer inflation and retail sales data.

Lastly, Canadian stocks are set to open a stronger session as rebounding oil prices could drive gains in the energy sector.

The S&P/TSX Composite Index rose 0.12 percent at the close of the trading session to 14,366.27 on Wednesday.