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Bonds, dollar

rally in

Toronto

TORONTO: Canadian bonds on Friday closed sharply higher, extending a rally that started Thursday on bullish U.S. sentiment and a stronger Canadian dollar.

Dealers warned the rally is technically overdone, and suggest the market is bound to sell off on Monday after two days of substantial firmness.

"There are a couple of theories why it went crazy this afternoon but I'm not convinced by any of them," one dealer said.

Canada's 9.0 percent of 2025 was C$1.19 stronger at C$105.75 to yield 8.466 percent.

The U.S. 30-year was up 1-11/32 to yield 6.71 percent for a spread of 176 basis points.

Analysts said Canadian bonds gained on the back of U.S. treasuries, which soared on strong futures, as well as a round on short-covering and the rallying Canadian dollar.

Dealers and analysts warned that the strength cannot continue. After two solid days, bonds are set for a sell-off while analysts warned upcoming economic datda could unettle the market DOLLAR The Canadian dollar closed sharply stronger after a frantic rally with more firmness forecast next week.

Dealers reported heavy interest in the Canadian dollar from U.S. institutional funds, although corporate accounts persistently sold into the strength.

A move through key technical resistance at C$1.3550 fed on itself and moved the unit up through a number of other key levels, including C$1.3520, C$1.3500, C$1.3480 and C$1.3460.

Stop-loss moves were triggered at every level and dealers expect to see more strength amid profit-taking next week.

Some dealers expressed surprise at the move, but noted that the Bank of Canada's reconfirmation of its 6.25 percent floor for overnight money this morning provided support.

The Canada closed at C$1.3445 (US$0.7435) against Thursday's close of 1.3535 (US$0.7388). On the crosses, the currency firmed to 1.0935 marks from 1.0979 and to 71.88 yen from 71.44 yen.-Reuter