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Canada bonds close firm

TORONTO: Canadian bonds closed firmer on Monday in light volumes with dealers forecasting a quiet week ahead of Friday's non-farm payrolls data in the US.

Both US and Canadian bond markets traded in light volumes with dealers accusing the US of holding Canada back.

"Here in Canada things are much more favourable to bonds, but without the US leading the way we can't rally", one dealer said. "The fundamentals are very good for bonds".

Canada's 9.0 percent of 2025 rose C$0.41 to C$109.87 to yield 8.11 percent against the US 30-year which was 14/32 higher at 6.64 percent for a spread of 147 basis points.

Dealers said a firm Canadian dollar and stable interest rate outlook are drawing international investment from Europe and Asia into Canadian bonds.

While economic data is mixed, there are signs of greater economic strength in the US than in Canada, which makes Canada more attractive in the short term, dealers said.

Canada also escaped a large and deep sell-off in the highly leveraged US market, one dealer said. Large US hedge funds hurt the US market over a relatively short time by unwinding large holdings of US five-year treasuries financed with yen borrowed at zero, he said.

"It was unwound over February and March", he said. "That led the technical softness in their market, which is still in bearish, negative territory".

Dealer said the market is very nervous as it awaits Friday's non-firm payrolls figure, and many dealers and accounts will be trading on Good Friday even though the market is officially closed.

"It is highly anticipated", the dealer said. "A lot of people are terrified".

Among other prices, Canada's 8.75 percent of 2005 was C$0.33 higher at C$107.88 to yield 7.582 percent.-Reuter