CANADA FX DEBT-C$ rebounds on Chinese data, rate cut bets trimmed

Tue Jan 19, 2016 9:47am EST
 
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* Canadian dollar at C$1.4509 or 68.92 U.S. cents
    * Bond prices lower across the maturity curve

    TORONTO, Jan 19 (Reuters) - The Canadian dollar firmed
against its U.S. counterpart on Tuesday after China's GDP data
provided relief for battered commodity-linked currencies, while
traders trimmed bets that the Bank of Canada will cut rates on
Wednesday.
    China's fourth-quarter growth slowed to 6.8 percent, meeting
forecasts but also raising hopes that Beijing will cushion the
slowdown with more stimulus policies. China is a
major customer for Canada's commodity exports.
    Oil prices rose as data showed Chinese oil demand likely hit
a record high in 2015, but contracts remained near 12-year lows
as the IEA said the market should stay oversupplied this year.
 
    The implied probability of a Bank of Canada rate cut this
week was little more than 50 percent, down from 64 percent on
Monday. A rate cut has been fully discounted by May. 
    At 9:02 a.m. EST (1402 GMT), the Canadian dollar 
was trading at C$1.4509 to the greenback, or 68.92 U.S. cents,
stronger than the Bank of Canada's official close on Monday of
C$1.4557, or 68.70 U.S. cents.
    The currency's strongest level of the session was C$1.4433,
while its weakest level was C$1.4559. On Monday, it hit its
weakest since April 2003 at C$1.4650.
    On Monday, Prime Minister Justin Trudeau struck a more
downbeat note than typical on the battered currency as well as
low oil prices, saying they hurt large parts of the economy.
Trudeau sidestepped a question as to whether budget deficits
will be much larger than promised to help a sluggish economy. 
 
    Canadian investors bought a record C$16.46 billion ($11.35
billion) worth of foreign securities in November, mostly in U.S.
Treasury bonds and stocks, Statistics Canada said. 
    Canadian government bond prices fell across the maturity
curve, with the two-year price down 6.5 Canadian
cents to yield 0.337 percent and the benchmark 10-year
 falling 42 Canadian cents to yield 1.205 percent.
The yield hit a record low on Friday at 1.143 percent. 
    The Canada-U.S. 10-year bond spread was 1.7 basis points
less negative at -85.6 basis points as Canadian government bonds
underperformed. It hit a record-wide gap toward the end of
December at -90.3 basis points.

 (Reporting by Fergal Smith; Editing by Meredith Mazzilli)