CANADA FX DEBT-C$ slides to 5-mth low; bond yields sink to record

Thu May 31, 2012 12:24pm EDT
 
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* C$ hits 2012 low of C$1.0366 vs US$, or 96.47 U.S. cents
    * Soft U.S. data, euro zone fears weigh
    * Canadian 10-, 30-year bond yields at record lows

    By Claire Sibonney	
    TORONTO, May 31 (Reuters) - The Canadian dollar slumped to
its weakest level against the U.S. dollar since late December on
Thursday, while long-term bond yields hit record lows, as
investors shunned riskier trades on signs of soft U.S. growth
and worries about Spain's debt troubles.	
    The Canadian currency touched C$1.0366 against its
U.S. counterpart, or 96.47 U.S. cents, its softest level since
Dec. 20.	
    The commodity-linked currency weakened after a report by
private payrolls processor ADP showed U.S. private employers
created 133,000 jobs in May, fewer than the expected 148,000.
And new claims for unemployment benefits rose by 10,000 for the
fourth straight weekly increase. 	
    The data comes ahead of Friday's key U.S. payrolls report. 	
    Markets were also disappointed by data that showed U.S.
first-quarter growth was revised down and Midwest business
activity slowed considerably. 	
    "Risk sentiment just continues to plunge by the day," said
Mazen Issa, Canada macro strategist at TD Securities. "Things
were holding in fairly steady until equities opened and you saw
the Canadian dollar just drop."	
    The S&P 500 and S&P/TSX composite index both fell
and were headed for their worst month since September.  	
    At 12:01 p.m. (1601 GMT), the Canadian dollar was at
C$1.0355 against its U.S. counterpart, or 96.57 U.S. cents, down
 from Wednesday's North American session close at C$1.0292
against the U.S. dollar, or 97.16 U.S. cents.	
    Issa sees the Canadian dollar weakening beyond C$1.04 should
Friday's Canadian GDP data and U.S. non-farm payroll report
dismay markets. In the near term he said the currency should
hover between C$1.03 and C$1.04 versus the greenback.	
    "Europe remains unresolved and there's a big even risk
centered around June 17 with the Greek election," said Issa.
"U.S. data is not getting any better, so there's not a lot of
positive things to latch onto at the moment."	
    Headlines out of Europe on Thursday did not help broader
confidence. On Wednesday the Canadian dollar had firmed to a
2012 high of C$1.2721 against the euro. 	
    European policymakers' warnings about Spain's banks and
Greece's survival in the euro area pushed the euro to a
two-year low against the U.S. dollar on Thursday and hastened a
rush into safe-haven assets such as Austrian and French bonds,
whose 10-year yields hit a euro-era low. 	
    Canadian government bond prices also picked up steam across
the curve, sending longer-dated yields to record lows. Canada's
benchmark 10-year bond yield hit a record trough of
1.711 percent, while the 30-year yield touched a
record low of 2.276 percent.