CANADA FX DEBT-C$ slides on Europe concerns

Wed May 9, 2012 4:30pm EDT
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* C$ ends at C$1.0009 vs US$, 99.91 U.S. cents
    * Hits low of C$1.0064 vs US$, or 99.36 U.S. cents
    * Touches weakest level since Jan. 30
    * But hits 2012 high against Australian dollar
    * Bond prices flat to softer across curve

    By Jennifer Kwan	
    TORONTO, May 9 (Reuters) - Canada's dollar slid to its
lowest in three and half months on Wednesday, back below parity
against the U.S. dollar, as persistent fears about the health of
Spanish banks and a political impasse in Greece worsened fears
about the euro zone debt crisis.	
    Greece's two mainstream parties rejected a coalition led by
radical leftist Alexis Tsipras, forcing the country closer to
having to re-run Sunday's inconclusive election that saw voters
overwhelmingly reject its EU/IMF bailout. 	
    Meanwhile, Spain will demand banks set aside another $45
billion against loans to builders as it battles to rebuild
confidence, sources told Reuters. Huge bank losses have raised
fears the country may need an international bailout.

    Concerns about the stability of the region pushed the
Canadian currency to C$1.0064 against the U.S. dollar,
or 99.36 U.S. cents, its weakest level since Jan. 30.	
    "The Canadian dollar is a risk-sensitive currency. The
European concerns are weighing," said Andrew Kelvin, senior
fixed income strategist at TD Securities.	
    The currency finished at C$1.0009 versus the U.S. dollar, or
99.91 U.S. cents, down from Tuesday's North American session
close at C$0.9983 versus the U.S. dollar, or $1.0017.	
    The Canadian dollar notched a mixed performance against its
G10 currency cousins. It outperformed currencies such as the
euro and New Zealand dollar, and reached a 2012 high of C$1.0062
against the Australian dollar. But it underperformed versus the
greenback and the Japanese yen.	
    "People didn't want to believe that it would happen. It is
happening - that Europe would rear its ugly head again," said
John Curran, senior vice president at CanadianForex.	
    Curran said he sees key Canadian dollar support at
C$1.0050-C$1.0080 against the greenback.	
    The currency weakened in tandem with global equity and
commodity markets as concerns over Europe added to worries about
the impact of softer growth in the U.S. 	
    Canadian bond prices were mostly lower across the curve,
with Canada's 2-year bond down 1 Canadian cent to
yield 1.231 percent, while the benchmark 10-year bond
 retreated by 29 Canadian cents to yield 2.003
    Demand for Canadian 5-year government bonds was decent on
Wednesday, with the average yield at 1.5 percent as investors
remained nervous about the state of the global economy. 	
    The C$3.4 billion auction of bonds produced an average yield
of 1.5 percent, relatively flat from 1.4 percent at the last
five-year bond auction in February.	
    The bid-to-cover ratio was 2.586, the highest since May. The
ratio is a gauge of investor appetite, and a reading above 2
generally implies a well received auction. 	
    "It just reflects the fact that there's not a lot of risk
appetite out there," said Kelvin.