2012.06.01 18:11:30 2nd UPDATE: US Payrolls Post Weak Gain; Manufacturing Slows In May

By Don Curren Of DOW JONES NEWSWIRES TORONTO (Dow Jones)-Canadian bonds surged higher Friday as a deluge of soft economic data from all corners of the world sent investors scurrying for the safety of fixed-income assets for shelter from the storm. Yields for Canada's two-year bond were at 0.897% Friday, from 1.064% late Thursday. The 10-year bond was yielding 1.645%, from 1.738%, according to electronic bond trading platform CanDeal. "We had a deluge of data that all was on the soft side, beginning in Asia, then going to Europe and hitting North America," said Avery Shenfeld, chief economist at CIBC World Markets. "It was pretty much a one-way story for the bond market today, which was buy bonds because economic growth looks soft," he said. The high-water market for the flood of negative data came at 8:30 a.m. EDT (1230 GMT), with news that the U.S. nonfarm payrolls report for May showed a gain of 69,000 jobs, the smallest in a year and far below the 155,000 forecast by economists. The unemployment rate in the U.S. rose unexpectedly to 8.2% from 8.1%. Canadian bonds underperformed U.S Treasurys Friday. "The U.S. tends to be the more volatile bond market, and historically they outperform in a rally," Shenfeld said. Another factor enabling the U.S. to outperform is a renewed round of "chatter" about quantitative easing in the U.S. market, which would mean more buying of long bonds by the Federal Reserve, he said. Canada made its own small contribution to the data deluge when Statistics Canada reported that gross domestic product grew by 1.9% on an annualized basis in the first quarter, consistent with expectations. GDP grew by only 0.1% in March. "What was a bit of a disappointment was that March GDP came in with only a 0.1%," Shenfeld said. "That may have us revising downwards slightly our projection for the second quarter, which we still think will be better than Q1, but perhaps by not as much of an edge." -Don Curren, Dow Jones Newswires; 416-306-2020; don.curren@dowjones.com (END) Dow Jones Newswires June 01, 2012 12:15 ET (16:15 GMT)