Bond markets, bank earnings and the budget will all be on traders’ minds this week.

Canada’s federal budget is slated for Wednesday. It will be sandwiched between retail trade data on Monday, consumer inflation data on Tuesday, and the fourth quarter current account balance on Friday.

CIBC World Markets says that the federal budget will be a “snoozefest” for the bond market, “given that the bottom line balance is already taken for granted. Any business or investment tax measures are likely to be too small to be of major interest to equities, as Ottawa already sopped up a lot of its fiscal room with gifts to the provinces for health and equalization. In any event, politics suggests that significant tax cuts will be deferred to a (2006?) pre-election budget.”

According to BMO Nesbitt Burns, a broad range of spending initiatives is likely to be announced, “but there are at least some signs that the government is preparing to display some fiscal virtues by detailing cost savings of $10 billion, that will spread the pain across the country. The budget will likely play it safe, rather than taking any bold initiatives on the tax front, even though there is a good case to be made that corporate taxes are in need of serious reform.”

On the data front, CIBC predicts that soft retail trade, “will complete a gloomy picture for December GDP, while core consumer prices will remain better behaved than those stateside, both allowing the Canadian bond market to outperform Treasuries”.

BMO agrees that conditions are ripe for a disappointing retail sales report for December. “A decline of 0.5% on the headline would not be a shock, neither would a somewhat less disheartening 0.2% drop in the ex. autos component.” It predicts that consumer prices are set to rise by a modest 0.1% in January. The headline rate of inflation will rise a tick to 2.2%, and core prices are likely to continue a slow steady progression toward the Bank of Canada’s 2% target, it adds.

In the U.S., markets are closed on Monday for Presidents’ Day. Tuesday brings consumer confidence data, followed by consumer price data and the minutes of the latest fed meeting on Wednesday, durable goods orders on Thursday and fourth quarter real GDP on Friday.

“After the hot PPI, markets will key on the more important CPI figures,” CIBC predicts, “and Treasuries could come under further pressure if core prices print a 0.3% rise. The key here is whether wholesale price hikes for autos made it to the retail level, and what happened to housing rents that month.” BMO Nesbitt expects a 0.3% gain for the January headline and core CPI .

Durable goods orders will likely be lacklustre in January, Nesbitt adds. It predicts that real GDP growth will be revised up to around a 3.5% rate from its advance reading of 3.1%.

On the earnings front, the banks will be front and centre in a fairly busy week. Goldcorp and Leon’s Furniture report on Monday.

Bank Of Montreal leads off for the banks on Tuesday, along with Forzani Group, Leitch Technology, MacDonald, Dettwiler and Associates, Neurochem and Tundra Semi. Wednesday will focus on resources, with Agnico-Eagle Mines, Canadian Natural Resources, EnCana, Finning International, HUB International, Meridian Gold, Placer Dome, QLT, RONA, Trican Well Service and Wescast Industries.

The banks will be busy on Thursday, with CIBC, TD Bank and National Bank all reporting, along with Lafarge, Mullen Transportation, Newmont Mining, Pan American Silver, Ritchie Bros. Auctioneers and Stantec. Royal Bank and Laurentian close the week, joined by Four Seasons Hotels, MDC and Wi-Lan Inc.