The Canadian bond prices retreated after two days of strong gains, helped along by strong Chicago PMI data that boosted US treasuries.
Weak US data and government warnings about the possibility of attacks on US soil had helped bonds drive higher on Wednesday and Thursday, but the overall trend for the past two months has been downward as the market has bet on imminent interest rate hikes.
The US Federal Reserve is expected to raise its funds rate as early as next month, while the Bank of Canada is seen raising its overnight rate later this year.
The overnight rate is at 2 percent, while the Fed funds rate is 1 percent. The two-year bond slipped 10 Canadian cents to C$99.86 to yield 2.999 percent, while the 10-year bond fell 39 Canadian cents to C$103.53 to yield 4.763 percent.
The yield spread between the two-year and 10-year bond moved to 176.4 basis points from 169.0 in the previous session.
The 30-year bond, due 2029, lost 52 Canadian cents to C$106.19 to yield 5.300 percent. In the United States, the 30-year treasury yielded 5.344 percent.
The three-month when-issued T-bill yielded 2.01 percent, up from 2 percent from the previous close.
The Canadian dollar eased from its one-month highs on Friday as traders chewed on signs of economic strength in Canada and the United States, and adjusted their positions ahead of the weekend.
With US markets closed on Monday for Memorial Day, many traders booked off early, leaving markets listless for most of the afternoon.
The currency finished at C$1.3622 to the US dollar, or 73.41 US cents, down from C$1.3582, or 73.63 US cents, at Thursday's close.
The Canadian dollar was unable gain ground early in the session despite news that Canada's current account surplus grew in the first quarter to C$9.49 billion, beating market expectations for the surplus to widen to C$8 billion.
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