Canadian bonds rise modestly ahead of Bexit referendum

The Canadian bonds traded modestly firmer on Wednesday as investors await the Brexit vote on Thursday. Also, we expect it to trade in a range bound ahead of the referendum outcome. The yield on the benchmark 10-year Treasury note which moves inversely to its price fell 1-1/2 basis points to 1.239 percent and the yield on the short-term 2-year bonds also dipped 1/2 basis points to 0.603 percent by 15:15 GMT.

Two opinion polls on Monday showed that the “Remain” camp has recovered some ground in Britain’s European Union referendum debate.

According to the NatCen poll results on the United Kingdom referendum campaign, 53 percent would vote to 'Remain' in the European Union, while, 47 percent would vote to 'Leave'. Similarly, the ORB/Daily Telegraph poll results on the United Kingdom referendum campaign, 53 percent would vote to 'Remain' in the European Union, while, 46 percent would vote to 'Leave'.

On the other hand, a new UK poll by Survation for IG group shows 45 percent favour remaining in the EU vs 44 percent for remaining. This slim +1 percent pro-EU balance is down from 3 percent in the organisation's last survey published on Monday.

The implied probability of a 'Remain' vote in Thursday's EU referendum in the UK has softened a shade to 77 percent according to the latest Betfair odds, down from Monday's recent high at 78 percent.

On the other hand, investors did not react to firm retail sales figure, which rebounded in April, rising 0.9 percent on higher consumer gas prices. The better-than-expected report follows a revised 0.8% decline in retail sales the previous month. The value of retail sales rose to a seasonally adjusted 44.28 billion Canadian dollars ($34.56 billion) in the month, Statistics Canada said Wednesday. Market expectations were for a 0.8 percent increase, according to economists at Royal Bank of Canada.

Lastly, Canada's main stock index firmed to a one-week high on Wednesday, led by financial stocks as investors grew more optimistic that Britons would vote to stay in the European Union. 

Meanwhile, the Toronto Stock Exchange's S&P/TSX composite index rose 19.64 points, or 0.14 percent, to 14,031.96 by 15:00 GMT.