The Canadian long-dated bonds rallied from morning weakness as traders shook off the strong Canadian factory orders and a report showing firm US April inflation, and instead took advantage of rock-bottom bond prices.
Bonds have been tumbling since late March as strong economic data have forced the market to begin pricing in imminent interest rate increases.
"Today was just kind of an unwinding of previous positions," said Carlos Leitao, chief economist at BLC Securities.
"I think the market is still now pricing in a June US rate hike, and I think that from here on, the decline in prices will continue, but at a more modest pace. The big movement took place already in the last 10 days or so."
The bond market largely ignored fairly strong US inflation figures, as they were already priced into the market, Leitao said.
While the headline US consumer price index rose a slightly lower-than-expected 0.2 percent in April, the more important core index, excluding food and energy, firmed 0.3 percent, above forecasts of a 0.2 percent rise, and firming US rate expectations.
The two-year bond slipped 3 Canadian cents to C$99.91 to yield 3.046 percent, while the 10-year bond rose 30 Canadian cents to C$102.87 to yield 4.853 percent.
The yield spread between the two-year and 10-year bond moved to 180.8 basis points from 186.2 basis points in the previous session.
The 30-year bond, due 2029, rose 72 Canadian cents to C$104.82 to yield 5.396 percent. In the United States, the 30-year treasury yielded 5.500 percent.
The three-month when-issued T-bill yielded 2 percent, unchanged from the previous close.
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