Canadian bonds slump as crude prices rise on lower US stockpiles

The Canadian government bonds slump on Thursday following rally in the crude oil prices. The yield on the benchmark 10-year bond which moves inversely to its price rose 3 basis points to 1.003 percent and the yield on the short-term 2-year bonds jumped more than 1 basis point to 0.498 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.

Today, crude Oil prices edged higher on Thursday for a second day, supported by a report of another fall in U.S. crude oil inventories and a weaker U.S. dollar, although a glut of refined products and economic growth concerns continued to loom over the market.

The American Petroleum Institute (API) said its data showed U.S. crude stockpiles fell by 6.7 million barrels last week, declining for a seventh week in a row. The International benchmark Brent futures rose 1.39 percent to $49.47 and West Texas Intermediate (WTI) jumped 1.12 percent to $47.96 by 13:00 GMT.

In terms of data, the Canada building permits report revealed an overall decrease of -1.9 percent m/m for May, versus the revised +0.1 percent m/m increase seen for April (previous was -0.3 percent m/m), well below expectations for a +1.5 percent m/m increase.

Lastly, Canadian stocks are poised for a quiet session Thursday amid a lack of positive catalysts other than higher crude oil prices. The Canadian market has been on a roller coaster rise since the recent Brexit vote, but traders may pause to assess other geopolitical developments in the coming days.