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Bond prices declined and yields moved higher in February as investors became more confident about growth and less concerned about the European sovereign debt crisis. Riskier assets, such as equities and the Euro, enjoyed rallies while safer investments such as Canadian and U.S. government bonds fell in value. The DEX Universe Bond index fell 0.40% in the month.
Economic data in Canada was mixed during February. Housing starts remained firm and leading economic indicators pointed to continued economic growth in coming months. Less positively, retail sales growth was tepid and the Canadian economy struggled to create new jobs. As a result, the unemployment rate rose to 7.6% from 7.5% the previous month. Inflation rebounded to 2.5% from 2.3%, in part due to rising gasoline prices.
In the United States, the economic news was more positive. In particular, the labour market continued to recover from the recession as initial claims for unemployment benefits fell to the lowest level in four years and unemployment fell to 8.3% from 8.5% the previous month. (more…)