CANADA FX DEBT-C$ strengthens, maintains gains after fiscal stimulus revealed

Tue Mar 22, 2016 5:50pm EDT
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* Canadian dollar ended at C$1.3035, or 76.72 U.S. cents
    * Bond prices lower across the maturity curve

    By Fergal Smith
    TORONTO, March 22 (Reuters) - The Canadian dollar
strengthened against its U.S. counterpart on Tuesday,
maintaining gains after the federal budget revealed expected
stimulus, while earlier losses after deadly blasts in Brussels
were reversed.
    The new Liberal government said that in a bid to revive
growth it would run a C$29.4 billion deficit for fiscal 2016-17,
slightly larger than a C$28.6 billion shortfall that analysts
had expected. 
    "The government has done a fairly good job of telegraphing
the details of this budget," said Jack Spitz, managing director
of foreign exchange at National Bank Financial. "So the market
reaction has been fairly muted."
    "If it creates economic growth and jobs and it keeps the
Bank of Canada from potentially cutting again I guess it's
ultimately a good thing for the currency," he added.
    The Bank of Canada has said it will incorporate the fiscal
measures into its April projection.
    Bond issuance will jump 45 percent to C$133 billion in the
coming fiscal year to accommodate the deficit, led by increased
sale of short- and medium-term bonds.    
    Earlier in the session, the explosions in the Belgian
capital had pushed investors toward the safe haven
    However, losses on Wall Street were pared and crude oil was
down only slightly after an earlier tumble.  
    U.S. crude prices settled at $41.45 a barrel, down
0.17 percent. 
    The Canadian dollar ended at C$1.3035 to the greenback, or
76.72 U.S. cents, stronger than Monday's close of C$1.3085, or
76.42 U.S. cents.
    The currency's strongest level of the session was C$1.3028,
while its weakest level was C$1.3138.
    Canadian government bond prices were lower across the
maturity curve, with the two-year price down 5.5
Canadian cents to yield 0.588 percent and the benchmark 10-year
 falling 26 Canadian cents to yield 1.331 percent.
    The spread between 10-year and 30-year yields narrowed 2.4
basis points to 76.9 basis points, as the longer dated maturity
    It was partly due to relief that the government did not
target more long-term bond issuance, according to Andrew Kelvin,
senior rates strategist at TD Securities.

 (Additional reporting by Alastair Sharp; Editing by Chris