The Canadian bond prices were pulled lower on Friday, along with their US counterparts, as a surprisingly sharp increase in US core producer prices for January raised fears of aggressive US interest rate hikes. Also keeping prices pinned lower was Canadian wholesale trade data that surged 1.1 percent in December from November, beating the 0.3 percent rise predicted by analysts. That contrasted with other recent data that suggested the economy was starting to weaken.

However, Canadian bond losses were not as sharp as the decline in US treasuries.

The two-year bond slipped 3 Canadian cents to C$100.52 to yield 2.948 percent, while the 10-year bond slid 39 Canadian cents to C$105.73 to yield 4.245 percent.

The yield spread between the two-year and 10-year bond moved to 129.7 basis points from 126.7 at the previous close.

The 30-year bond, due 2029, fell C$1.00 to C$116.05 to yield 4.716 percent. In the United States, the 30-year treasury yielded 4.648 percent.

The three-month when-issued T-bill yielded 2.47 percent, unchanged from the previous close.

The Canadian dollar eased against the US currency on Friday, as the greenback got a mild boost from strong economic data, but trading was light ahead of a Monday holiday for US markets.

The currency finished at C$1.2315 to the US dollar, or 81.20 US cents, down from C$1.2278 to the US dollar, or 81.45 US cents, at Thursday's close.

Copyright Reuters, 2005