The Canadian government bonds slump on Wednesday as investors struck a cautiously optimistic tone ahead of inflation data release. The yield on the benchmark 10-year bond which moves inversely to its price rose 2 basis points to 1.098 percent and the yield on short-term 2-year note also jumped nearly 2 basis points to 0.589 percent by 13:00 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. The International benchmark Brent futures fell 1.52 percent to $45.92 and West Texas Intermediate (WTI) tumbled 1.19 percent to $44.12 by 13:00 GMT.
Last week, the central bank announced no change in the overnight rate target of 0.50 percent, in line with market expectations. Moreover, the BOC in its statement mentioned that the risks to the profile for inflation are roughly balanced, although the implications of the Brexit vote are highly uncertain and difficult to forecast.
According to the statement, real GDP grew by 2.4 percent in the first quarter of 2016, against market expectations of -1.0 percent contractions, which weighed down by volatile trade flows, uneven consumer spending, and the Alberta wildfires. The statement also justified that economy is expected to grow further in the third quarter of 2016 due to stabilising crude oil prices in the international market.
Lastly, Canadian stock futures indicated a lower start for Canada's main stock as investors turned risk-averse amid geopolitical worries and weak crude oil prices.
The S&P/TSX Composite Index fell 0.05 percent at the close of the trading session to 14,524.61 on Tuesday.
