Canadian bonds trade lower following rally in crude oil prices

The Canadian government bonds traded lower Friday as crude oil prices remained steady at 2016 high following U.S. inventories data.

The yield on the benchmark 10-year bond, which moves inversely to its price, rose nearly 3 basis points to 1.122 percent mark, the yield on long-term 30-year note climbed 1-1/2 basis points to 1.779 percent and the yield on short-term 2-year bond jumped ½ basis point to 0.581 percent by 12:50 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. Crude oil prices bounced above $51 a barrel after a report that U.S. fuel inventories may have fallen for a fifth straight week.

The U.S. data showed crude oil stockpiles fell 3 million barrels last week to 499.74 million barrels, confounding expectations for an increase. The International benchmark Brent futures rose 0.81 percent to $52.30 and West Texas Intermediate (WTI) also jumped 0.74 percent to $50.20 at 12:50 GMT.

Investors now look ahead to the September employment data scheduled to be released on October 7. Lastly, Canadian stocks are set to open a stronger session on Friday, as rebounding oil prices could drive gains in the energy sector.

The S&P/TSX Composite Index rose 0.62 percent at the close of the trading session to 14,610.58 on Thursday.