Canadian Bonds Softer Despite Equity Sell Off

 
   By Ben Dummett 
 

        TORONTO--Canadian bonds were sluggish Monday as investors took guidance primarily from weakness in the U.S. government debt market instead of more evidence of a slowing domestic economy and a sell off in equities.
        Canada's two-year bond yield was at 0.427%, unchanged from late Friday, according to electronic trading platform CanDeal. The 10-year bond yield was at 1.577%, from 1.564%. Bond yields move inversely to prices.
        The weakness in bonds contrasts with the release of soft economic data that showed a dropped in wholesale trade in Canada and heavy selling of stocks, particularly in the commodities sectors.
        Bonds would typically gain in this environment because it supports the prospect of lower interest rates and offers investors reason to seek protection in bonds and other safe-haven assets.
        But the decline in U.S. bonds took precedence as investors increasingly bet on a rate hike by the Federal Reserve.
        Last week, the Bank of Canada cut its overnight policy rate for the second time in less than a year. But the prospect of another decrease could recede as expectations of a U.S. rate hike rises, Douglas Porter, chief economist at BMO Capital Markets, said.
        An interest rate policy that completely diverges with the U.S. "could be poisonous for the Canadian dollar," Mr. Porter said.
        Write to Ben Dummett at ben.dummett@wsj.com
        (END) Dow Jones Newswires

        July 20, 2015 15:40 ET (19:40 GMT)

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