The bond market continues to rally as risk aversion remains the dominant theme.

Growth in Canadian Building Permits for March of 17.2% [exp. -2.5%] should, in isolation, send rates higher.

Any positive economic story that the Permits number told was overshadowed by US weekly Initial Jobless Claims of 474k, which continue to remain stubbornly high. Last week’s print was 431k and expectations for this week were 410k. Ongoing labour market weakness will continue to undermine the notion of a self-sustaining recovery, and all else equal, will conspire to keep rates lower than what they otherwise would be.

Watch out for Friday’s Employment numbers for April, both in Canada and the US.

The bond market has rallied a touch this morning vs. yesterday’s close on mixed data in the US and global events.

Various measures of the CPI for January were slightly higher than expected (e.g. CPI ex food and energy grew YoY +1.0%, vs. +0.9% expected). Meanwhile, Initial Jobless Claims were 410k (400k exp.) and Continuing Claims were 3,911k (3,893k exp.), demonstrated that labour market weakness still persists in spite of recent favourable numbers.

On the Canadian front, a weak Wholesale Sales growth print of 0.8% for December (+0.9% exp.) disappointed, as did a downward revision of the November reading as well.

The higher CPI numbers tend to exert upward pressure on rates, while the weak employment numbers suggest that rates should remain low. The tiebreaker this morning however, appears to be political risks centered in the Middle East. Everyone knows about regional protests that in some countries are turning quite violent, but last night’s reports that Iran is sending two warships through the Suez Canal has led to some risk being taken off the table.