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Canadian bonds end flat in thin trade before year end

TORONTO: Canadian government bonds ended steady to slightly weaker in thin trade on Thursday as North American stock markets gave up initial gains and slumped.

The Canadian dollar was stable following a two-day rally which took the currency to seven-month highs on Wednesday.

US markets will close early or be closed all day this Friday, while Canadian markets will shut down next Monday for New Year's holidays.

Canada's benchmark 30-year bond due June 1, 2027, fell 7 Canadian cents to C$122.98 to yield 6.240 percent. The US long bond reversed losses and rose 7/32 to yield 6.428 percent.

The Canadian long bond yield traded 18.8 basis points below the US 30-year yield after trading 21.0 basis points below the US level at the previous close.

Financial markets paid little attention to economic fundamentals as liquidity thinned before the year end.

For inflation and growth outlook, the market will monitor the US National Association of Purchasing Management (NAPM) business sentiment data for December on Monday and US and Canadian December jobs data on Friday next week.

Data released on Thursday showed little inflation threat to the US economy and soothed fears in the bond market.

The purchasing managers' overall index for the Chicago area came in lower than forecast at 54.6 in December after 56.8 in November. The prices paid and employment indexes also fell.

In contrast, US jobless claims, also released on Thursday, showed a decline to 274,000 in the December 25 week from 283,000 the previous week.

The two-year bond due December 1, 2001, fell 2 Canadian cents to C$98.91, yielding 5.859 percent.

The two-year yield was quoted 38.1 basis points below the 30-year yield after 38.2 percent at the previous close.

The money market was mixed in narrow ranges. Canada's three-month when-issued treasury bills yielded 4.96 percent after 4.98 percent at the previous close.-Reuters