Canadian bonds plunge on tracking firm crude

The Canadian government bonds plunged on Thursday as investors cooled on safe-haven assets amid gains in riskier assets including stocks and oil. The yield on the benchmark 10-year bonds, which moves inversely to its price rose 4bps to 1.340 pct and the yield on the 2-year bonds jumped 3 bps to 0.569 pct by 1300 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. Today, the crude oil prices climbed after International Energy Agency said in its report that the global supply glut to shrink this year. They mentioned that non-OPEC output falling 800k barrel per day (bpd) in 2016, from previous forecast of 710k bpd as unplanned outages start to bite and global crude oil stocks to rise by just 200k bpd in the second half of 2016, as compared to 1.3 million bpd in first half. Nigeria, Libya and Venezuela have seen crude output fall 450k bpd from a year ago and further rally in oil prices to be tempered by brimming crude and product stocks, until more levels of inventory are reached, they added in a note. According to the US DOE, crude inventories decreased 3.4 million barrels, as compared to previous build of 2.8 million barrels for the week ending 6 May. This came alongside decreases seen in gasoline inventories of 1.2 million barrels, from prior 0.5 million barrels, also supported oil prices. The International benchmark Brent futures rose 0.90 pct to $48.02 and West Texas Intermediate (WTI) jumped 1.43 pct to $46.89 by 1215 GMT.

Today, the Canada new housing price index report revealed an overall increase of +0.2 pct m/m in March, above market expectations for a +0.1% m/m result, from 0.2 pct m/m reading seen in February.

The Canadian stocks futures trade higher after the International Energy Agency (IEA) raised its 2016 global oil demand forecast. June futures on the S&P TSX index were up 0.67 pct at 11:30 GMT.