Canadian bonds slump as crude oil prices rebound following drop in U.S inventories

The Canadian government bonds slumped Wednesday as the crude oil prices rebounded after a surprisingly large drop in U.S. crude inventories data.

The yield on the benchmark 10-year bond, which moves inversely to its price, rose 1 basis point to 0.975 percent, the yield on long-term 30-year note also bounced nearly 1 basis point to 1.644 percent and the yield on short-term 2-year bond climbed 1/2 basis point to 0.500 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. The crude oil prices rebound as the United States American Petroleum Institute (API) crude inventories dropped 752,000 barrels in the week to September 23 to 506.4 million barrels, compared with a forecast of a 2.8 million barrel build by analysts polled by Reuters. The International benchmark Brent futures rose 1.20 percent to $47.08 and West Texas Intermediate (WTI) jumped 1.16 percent to $45.19 by 12:30 GMT.

Investors remained keen to focus on the series of upcoming July gross domestic product (GDP) data. Lastly, Canadian stocks are set to open a stronger session on Wednesday, as rebounding oil prices could drive gains in the energy sector.

The S&P/TSX Composite Index fell 0.42 percent at the close of the trading session to 14,558.04 on Tuesday.