CANADA FX DEBT-C$ weakens as oil prices retreat, risk appetite fades
* 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 barrel. 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 outperformed. 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 anticipated. 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)
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