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Canadian bonds

close lower

TORONTO: Canadian bonds closed lower after a higher-than-expected weekly US jobless claims figure and ahead of US and Canadian July unemployment data, traders said on Thursday.

"Our markets took their lead from the US today," said Jack Vermeeren, senior economist at Royal Bank. "Canada didn't have much (choice) but to go along."

Dealers turned bearish after this morning's US weekly jobless claims dropped by 51,000 from the previous month. Claims fell to 321,000 below early estimates of 371,000.

Canada's 9.0 percent of 2025 fell C$0.22 at C$102.17 to yield 8.791 percent, against the US 30-year which fell 27/32 at 6.93 percent, for a spread of 186 basis points. The spread narrowed slightly from 189 this morning.

Dealers expected to take profits after Wednesday's rally but were disappointed, Vermeeren said. They will be watching Friday's US payrolls report for July, which is seen increasing 135,000 compared to June's 215,000.

The US unemployment rate for July is seen virtually unchanged from the 5.6 percent in June. In Canada, the unemployment rate is forecast flat at 9.6 percent.

Analysts said the bond market rally may be over for a while, as further interest rate cuts in Canada are unlikely for the near term.

In other Canadian prices, the 9.0 percent of 2004 fell C$0.22 to 103.95 with a yield of 8.377 percent, against the US 10-year traded at 6.52 percent for a spread of 186 basis points.

Bond futures on the Montreal Exchange also posted modest losses with the September 10-year contract down C$0.08 at 103.70.

The short end of the curve closed virtually unchanged. The Canadian three-month cash T-bill closed at 6.71 percent, against the US three-month at 5.59 percent.-Reuter