CANADA FX DEBT-C$ hits new 8-month low, Canada's yields surge
(Adds analyst quote, details on CFTC data; updates prices) * Canadian dollar ends at C$1.3551, or 73.80 U.S. cents * Loonie touches its weakest since Feb. 25 at C$1.3589 * Bond prices lower across a steeper yield curve * 10-year yield touches an 11-month high at 1.591 percent By Fergal Smith TORONTO, Nov 14 (Reuters) - The Canadian dollar hit a new eight-month low against its firmer U.S. counterpart on Monday before paring some losses, and Canada's bond yields surged as investors bet that U.S. President-elect Donald Trump will pursue policies that raise inflation. The 10-year yield touched its highest in 11 months at 1.591 percent. Just one and a half months ago it hit a record low at 0.904 percent. The themes that have emerged since the U.S. presidential election continue to drive the market, said Amo Sahota, director at Klarity FX. "You've got ever increasing uncertainty over the trade relationship (with the U.S.), so that's weighing on the loonie. You've got (U.S.) rates not just normalizing but actually likely to press up higher in a spending environment that Trump is likely to lead and inflationary pressures building up," Sahota added. The U.S. dollar posted an 11-month peak against a basket of major currencies as the risk of faster inflation and wider budget deficits sent U.S. Treasury and other benchmark global bond yields shooting higher. The Canadian dollar ended at C$1.3551 to the greenback, or 73.80 U.S. cents, slightly weaker than Friday's close of C$1.3545, or 73.83 U.S. cents, according to Reuters data. The currency's strongest level of the session was C$1.3495, while it touched its weakest since Feb. 25 at C$1.3589. Speculators raised bearish bets on the Canadian dollar to the most since March, Commodity Futures Trading Commission data showed. Net short Canadian dollar positions rose to 21,312 contracts in the week ended Nov. 8 from 15,960 in the prior week. U.S. crude oil recovered from a three-month low on renewed hopes of a cut in production by major oil producers, but still settled 9 cents lower at $43.32 a barrel. Oil is one of Canada's major exports. Canadian government bond prices were lower across a steeper yield curve, with the two-year down 8 Canadian cents to yield 0.67 percent and the benchmark 10-year falling 105 Canadian cents to yield 1.551 percent. The 2-year yield fell 5.9 basis points further below its U.S. equivalent to a spread of -33.8 basis points, its largest gap since March, as U.S. Treasuries underperformed. (Reporting by Fergal Smith; Editing by Sandra Maler)
© Thomson Reuters 2017 All rights reserved.