Canadian Bonds Higher in Subdued Trading

 
   By Don Curren 
 

        TORONTO--Canadian bonds are higher Friday, with the long end of the yield curve outperforming shorter-dated issues in subdued trading.
        Canada's two-year bond yield was at 0.467% Friday, from 0.469% late Thursday, according to electronic trading platform CanDeal. The 10-year bond yield was at 1.686%, from 1.709%. Bond yields move inversely to prices.
        The move toward a flatter yield curve is probably due to some extent to a rebalancing of Thursday's steepening, said Chaad Aul, portfolio manager at Sun Life Global Investments.
        But the market is more prone to a steeper yield curve in the coming weeks as longer-term yields will be supported by a higher move in U.S. Treasury yields in advance of the likely interest rate increase from the U.S. Federal Reserve, he said.
        "I think a broader steepening trade is what you can expect going forward over the summer," he said.
        While yields at the long end of the curve will likely move with U.S. Treasurys, shorter-dated issues will experience downward pressure in yields in response to expectations that the Bank of Canada may be compelled to cut interest rates again, he said.
        Mr. Aul said the move might be a difficult one for the Bank, as it adopted quite a positive stance about the economic outlook after cutting rates in January.
        "Another about-face from the Bank of Canada I think requires somewhat of a higher bar," he said.
        Write to Don Curren at don.curren@wsj.com
        (END) Dow Jones Newswires

        July 03, 2015 11:36 ET (15:36 GMT)

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