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Canada bonds

close weaker

TORONTO: Canadian bonds closed weaker in thin, trendless trade on falling U.S. bonds and U.S. economic data, analysts said.

Weakness in the United States was blamed on reports the U.S. Federal Reserve will be less inclined to ease interest rates at its September meeting following strong economic data.

Analysts warned against reading too much into strong new home sales ahead of the release of U.S. second quarter real gross domestic product on Wednesday and August non-farm payrolls on Friday, which are considered better indicators of the interest rate outlook.

Canada's 9.0 percent of 2025 was off C$0.66 to C$105.97 to yield 8.447 percent against the U.S. 30-year benchmark which fell 04/32 to yield 6.71 percent for a spread of 174 basis points.

An announcement by Quebec premier Jacques Parizeau that he might call a provincial referendum on separation from the rest of Canada failed to move the market.

Some more profit taking is forecast overnight in Asia with further back-up expected ahead of a goverment auction on Wednesday of C$2.8 billion in 7.0 percent federal two-year bonds due September 15, 1997.

Dealers said provincial spreads are narrowing furiously, with Ontario to Canada 10-year spreads narrowing by three basis points to 27 points in one day.-Reuter