Canada bond yields are rising government last obstacles to long term

Canada bond yields are rising government last obstacles to long term, indicating more losses may be in store as investors favor stocks amid stimulus of U.S. trade patterns shown.

Canada's five-year bond yield closed above its 200 day moving average and last week 10-year bond lost the performance edge over the equivalent maturity U.S. securities for the first time since May. The 5 -, 10 - and 30-year yields are forcing so-called Fibonacci levels, according to Royal Bank of Canada and Canadian Imperial Bank of Commerce.

"From a technical standpoint-analysis, the bond market has suffered significant damage," said Ahmed Mohammed, a rate strategist at CIBC World Markets in Toronto. There is a "visible rotation out of bonds and stocks," he said.

Investors are dumping bonds in North America, reversing the buying frenzy that led to November 3 the Federal Reserve announcement that it would buy U.S. bonds in a policy known as quantitative easing. Accelerated settlement last week in President Obama's plan to extend the tax cuts of the Bush era.

Canada produces 10 he won by 43 basis points yesterday to 3.24 percent from 2.81 percent on Nov. 4, the day after the Fed announced plans to buy $ 600 billion in bonds Treasury in June to boost economic growth. Yields are rising so fast that exceed the 18 of March 2011 forecasts of economists surveyed by us. The higher, Kurt Karl, chief economist at Swiss Re in the U.S., asks that occurs in 3.2 percent by then. The weighted average estimate is 2.95 percent.

Fibonacci Analysis

ten-year yield touched 3.347 percent yesterday, exceeding 3.341 percent, representing 61.8 percent Fibonacci retracement of the April 20 high. Fibonacci analysis, the model patterns that appear in nature, is based on the theory that prices rise or fall in certain percentages after reaching a high or low. Was developed by a 13-century mathematician, Leonardo da Pisa, known as Fibonacci, who discovered the sequence in the study of the reproduction rate of rabbits.

Elsewhere in credit markets, Genworth MI Canada sold C $ 150 million (149 million) at 4.59 percent bond maturing in December 2015, Manulife Financial Corp. Ratings' s credit were cut by Standard & Poor's and the Royal Bank of Canada was reduced by Moody's Investors Service.

The extra yield investors demand to own the debt of Canadian companies rather than the federal government was held yesterday at 142 basis points, or 1.42 percentage points, unchanged from December 10, according to the index Bank of America Merrill Lynch. Corporate bonds have risen by 6.2 percent this year compared with 8.7 percent for U.S. corporate bonds and 6.7 percent for global companies.

RBC downgrade

Moody's Investors Service downgraded the credit rating of Royal Bank of Canada for the first time in at least 15 years to Aa1, the second highest rating from Aaa by greater attention to the lender in investment banking and trading. Moody's downgrades that has more in line with S & P, which rates the bank's AA-, the fourth-highest grade.

Manulife Financial Corp., the largest insurer, had its rating cut to A-by S & P, citing weak U.S. earnings.

In the provincial bond markets, the relative yields adjusted to 53 basis points, from 54 at the end of last week, as yields fell to 3.29 percent, according to Merrill Lynch. Of 397 bonds with a nominal value of C $ 468 000 000 000 has advanced 5.9 percent this year, following gains of 3.7 percent and 6.8 percent in the past two years.

Government bonds fell by 0.8 percent this month, trimming the advance from 2010 to 5.3 percent. That compares with a gain of 5.6 percent this year Treasuries. Global sovereign bonds are 3.3 percent higher this year.

Debt Auction

Canada will auction C $ 3 billion of 1.75 percent notes maturing in March 2013 morning. The government bond auction two years earlier, on November 10, drew an average yield of 1.56 percent and the bid-cover ratio of 2.45 times, according to the Bank of Canada Web site .

Royal Bank raised its mortgage interest rate five years by 20 basis points to 4.24 percent yesterday, reflecting the increase in bond yields.

Bank of Canada Governor, Mark Carney, said the refusal of some countries to leave their floating exchange rates is slowing inflation in advanced economies, which can cause further loosening of policy worldwide.

Maintaining fixed exchange force has begun to higher inflation in emerging markets and elsewhere disinflation, which "reinforces the strategy of low interest rates in major advanced economies and may require further rounds of quantitative easing," said Carney, 45 years, in the text of a speech yesterday in Toronto.

Household debt

Canadian families posted higher rates of debt than their U.S. counterparts for the first time in 12 years. The ratio of credit to households' disposable income market debt-to-staff rose to 148.1 percent from 143.4 percent, revenue fell 1.5 percent, Statistics Canada said in a report from Ottawa. U.S. debt representing 147.2 percent of disposable household income, according to the U.S. central bank.

"Chatter surrounding two key technical points in the Canadian bond market," wrote Mark Chandler, head of the Canadian currency and fixed income strategy at RBC Capital Markets in Toronto, in a note to clients yesterday. He cited the performance of five years late in its 200-day moving average, and the Canadian and U.S. 10-year yields parity.

"Both of these moves point to some downward movements in the futures markets for Canadian fixed income, although we suggest that they are premature," said Chandler.

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The yield on benchmark five-year that ended yesterday at 2.5 percent. It closed above the 200 day moving average, a momentum indicator, 2,465 percent on December 8 for the first time June 16. The 200-day moving average is calculated by adding the closing prices of the last 200 days and dividing by 200. As prices are adding new, higher prices are falling.

Yields on U.S. government bonds 10 years exceeded the equivalent of Canada by 4 basis points yesterday, the highest since May, the same month last converged. U.S. performance 10 years has risen 36 basis points to 3.28 percent from Obama and congressional Republicans last week agreed to extend the tax cuts of the Bush era, including cuts for the rich.

Canada yields thirty years, which ended yesterday at 3.66 percent, rose as high as 3739 percent, about 3.744 percent, which is 50 percent Fibonacci retracement level from high school this year on January 7 . Traders use Fibonacci levels to set goals once a reversal of the call has taken place.

The S & P / TSX Composite Index, Canada's primary securities is 4.9 percent since 02 November, a day before Fed Chairman Ben S. Bernanke, embarked on the last round of unconventional relaxation. The S & P 500 is up 3.9 percent during that period.

A decline in trading volume before the Christmas holidays may mean changes in government securities prices are exaggerated, according to Ahmed CIBC.

"Winter holidays in the coming weeks is likely to contribute to exacerbate the lack of liquidity and moves in an already weak market," the strategist wrote.