Canadian bonds yield climb on strong employment report

The Canadian long-term bonds slumped on Monday after reading strong march employment figure. The dip in bonds prices were also driven by the rise in the prices of crude oil. The Brent crude oil, a global benchmark, was up 1.07 pct at $42.39 a barrel. The yield on the benchmark 10-year Treasury note which moves inversely to its price, moved higher 2.69 pct to 1.261 pct and the yield on the 3-year Treasury bond ticked up 1.49 pct to 0.612 pct by 1410 GMT.

The Canadian March employment increased 41k and jobless rate declined to 7.1 pct in March from previous month’s 7.3 pct. However, unemployment continues to be higher than the level of 6.8 pct seen one year ago in spite of the rebound seen in March.

The details of the numbers were also strong. Full time jobs grew 35k in March, while part-time jobs rose by 5k. Private sector added 65k new positions in March, and is mainly responsible for most of the hiring in the past year. Self-employment and public sector hiring was relatively flat.

The bonds are trading weaker and slightly steeper, but still outperforming USTs across the curve. The overnight session saw light activity with bond prices suppressed by a better risk tone in EZ equity indices (led by banks). This week's economic and events calendar builds to midweek, when we’ll have the Ban of Canada rate announcement along with an updated Monetary Policy Report.

The markets will also focus on the up-coming Federal Reserve President speech. William Dudley, president of the Federal Reserve Bank of New York, is expected to speak at an annual conference for the Association for Neighbourhood and Housing Development at 9:25 a.m. ET. That will be followed by a speech by Dallas Fed President Rob Kaplan at a community forum hosted by the reserve in Ruston, Louisiana.

On Friday, provincial credit spreads closed mixed with a better bid in 5-years, while being slightly better offered out the curve. The provincial spreads are starting unchanged to slightly better bid. Supply may step into the calendar void to start the week but the Bank of Canada meeting on Wednesday may suppress the market’s bid for supply.