Canadian Bonds Higher After Disappointing May GDP

 
   


By David George-Cosh 
 

        TORONTO--Canadian bonds ended the week higher after a disappointing reading of Canada's economy in May spurred interest in the country's fixed-income securities.
        Canada's two-year bond yield was at 0.406% Friday, down from 0.454% late Thursday, according to electronic trading platform CanDeal. The 10-year bond yield was at 1.433%, down from 1.493%. Bond yields move inversely to prices.
        Canada's bond market closed early Friday afternoon and it will also be closed Monday due to a bank holiday in Ontario.
        Canada's gross domestic product for May fell 0.2% from the prior month, missing expectations of an unchanged reading. The drop is the second straight monthly decline and may be a telling sign that Canada may be in the midst of a recession.
        The Canadian economy shrank 0.6% on an annualized basis in the first quarter. A recession is commonly defined as two consecutive quarters of contraction.
        Some economists now say that Canada's economy is on track to grow by about 1.0% in 2015, and that the Bank of Canada is likely to maintain its highly accommodative policy for the next year.
        "This soft report keeps the Bank of Canada more biased to ease and is just another factor that will keep the Canadian dollar heavily on the defensive through the second half of this year," said Doug Porter, chief economist at BMO Capital Markets.
        Canada's fixed-income market will see two important economic indicators to help influence direction next week.
        Economists expect Canada's trade balance to improve to a deficit of C$2.5 billion in June from a deficit of $3.3 billion in the prior month.
        A report on Canada's labor market in July will be released next Friday, with economists looking for a gain of 20,000 jobs.
        Write to David George-Cosh at david.george-cosh@wsj.com
        (END) Dow Jones Newswires

        July 31, 2015 13:22 ET (17:22 GMT)

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