Canadian bonds steady in subdued trade; GDP data eyed

The Canadian government bonds traded nearly flat on Monday, succumbing to thin trading activity during a relatively quiet session that saw little data of much significance. Also, investors now await the May gross domestic product (GDP) data, which is scheduled to release on Friday at 12:30 GMT.

The yield on the benchmark 10-year bond, which moves inversely to its price, hovered around 1.10 percent mark and the yield on short-term 2-year note jumped ½ basis points to 0.570 percent by 13:00 GMT.

Last week, Canada’s consumer price index climbed 0.2 percent m/m in June, against market consensus of 0.1 percent m/m, from 0.4 percent in May. Core-CPI rose 2.1 percent (consensus was for 2.0 percent), from prior 2.1 percent.

On an annual basis, the Canadian consumer price index (CPI) rose 1.5 percent y/y in June, higher than the market consensus of 1.4 percent y/y, as compared to prior 1.5 percent in May.

Moreover, retail sales jumped 0.2 percent m/m in May, but the market was expecting a flat reading, as compared to negative 0.8 percent in April. Core-retail sales bounced 0.9 percent m/m (consensus was for 0.3 percent m/m), from previous 1.3 percent.

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 1.32 percent to $45.48 and West Texas Intermediate (WTI) tumbled 1.47 percent to $43.54 by 13:00 GMT.

Lastly, Canadian stocks may struggle to get back on the winning track Monday morning amid sluggish commodities.

The S&P/TSX Composite Index rose 0.24 percent at the close of the trading session to 14,600.66 (hitting its highest close in a year) on Friday last week.