Loonie little changed; 30-year yield at record low

Fri Dec 16, 2011 10:30am EST
 
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By Claire Sibonney

TORONTO (Reuters) - The Canadian dollar was little changed against the U.S. dollar on Friday morning and the 30-year bond yield hit a record low as a mixed bag of North American data and the threat of euro zone sovereign downgrades kept investors wary and trading thin.

Data that showed foreign purchases of Canadian securities dropped markedly in October from September as nonresidents lost appetite for federal treasury bills was seen as a negative for the currency.

However, U.S. consumer prices were flat in November, while the 12-month inflation reading fell for a second straight month, which could support riskier assets and give the Federal Reserve more room to stimulate a still-weak economy.

"Markets are very much in a consolidation mode today, we're seeing very light volume and liquidity is abysmal at the moment ... We're seeing some sharp moves but they're really not driven by large flows," said Blake Jespersen, director, foreign exchange sales at BMO Capital Markets.

"A lot of our clients that we've already spoken to are not that interested in this market today and a lot of London has already gone home and it's just a really lackluster day."

At 10:17 a.m. (1517 GMT), the Canadian dollar was at C$1.0349 against the U.S. dollar, or 96.63 U.S. cents, up slightly from Thursday's North American close of C$1.0357 versus the U.S. dollar, or 96.55 U.S. cents.

Jespersen said he expected the currency to stay trade range-bound for the rest of the session, taking direction mainly from the euro.

Analysts said a threat of downgrades from rating agency Standard & Poor's, which put a raft of euro zone countries on review ahead of last week's European Union summit, continued to hang over the sovereign debt of several countries, including Germany and France.

Canadian government bond prices edged higher across the curve. The two-year bond added 3 Canadian cents to yield 0.850 percent, while the 10-year bond gained 25 Canadian cents to yield 1.897 percent, after the yield hit a multi-decade trough of 1.897 percent. The 30-year bond climbed C$1 to yield a record low 2.485 percent.

(Reporting By Claire Sibonney; Editing by Peter Galloway)