CANADA FX DEBT-C$ weakens as oil prices retreat, risk appetite fades

Tue Feb 23, 2016 9:41am EST
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* Canadian dollar at C$1.3769 or 72.63 U.S. cents
    * Bond prices lower across the maturity curve

    TORONTO, Feb 23 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Tuesday as oil prices fell and
risk appetite faded, while losses were more pronounced against
the safe-haven Japanese yen.
    Oil prices eroded some of the previous day's gains over
doubts a potential production freeze will have any impact on the
existing global overhang of unwanted crude. 
    U.S. crude prices were down 1.71 percent to $32.82 a
    Weaker overseas stock markets were an additional headwind
for the risk-sensitive commodity currency. 
    At 9:13 a.m. EST (1413 GMT), the Canadian dollar 
was trading at C$1.3769 to the greenback, or 72.63 U.S. cents,
weaker than the Bank of Canada's official close of C$1.3712, or
72.93 U.S. cents.
    The currency's strongest level of the session was C$1.3696,
while its weakest level was C$1.3780.
    It weakened to 81.50 yen as the Japanese currency
    Canada's Liberal government said on Monday it will stick to
plans to invest in infrastructure projects even as it warned it
would run much bigger budget deficits than previously
    Adding private sector investment to government
infrastructure projects could spur even greater spending,
reducing the odds of another Bank of Canada rate cut.
    Canadian government bond prices were lower across the
maturity curve in sympathy with U.S. Treasuries. The two-year
 price fell 4.5 Canadian cents to yield 0.475 percent
and the benchmark 10-year was down 43 Canadian cents
to yield 1.17 percent.
    The curve steepened as the spread between the two-year and
10-year yields widened by 2.4 basis points to 69.5 basis points,
indicating underperformance for longer-dated maturities. Earlier
this month the spread hit its narrowest since January 2015 at
63.9 basis points.
    Bank of Canada Deputy Governor Lawrence Schembri will
deliver a speech on Wednesday, addressing the topic of elevated
household debt and the risk to financial stability.

 (Reporting by Fergal Smith; Editing by Bill Trott)