CANADA FX DEBT-C$ skids after dismal U.S. data, bonds surge

Wed Jun 1, 2011 4:54pm EDT
 
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   * C$ ends down at C$0.9757 to the U.S. dollar, or $1.0249
 * Bonds prices rally in flight to safety
 (Updates to close, adds details, commentary)
 By Claire Sibonney
 TORONTO, June 1 (Reuters) - Canada's dollar slid against
the U.S. currency on Wednesday and bond prices surged as market
players reacted to a raft of disappointing global economic data
and a subsequent selloff in riskier assets.
 U.S. companies hired far fewer workers than expected in May
and output in the manufacturing sector slowed to its lowest
level since 2009, adding to concerns that the U.S. recovery is
running out of steam. [ID:nN01147563]
 The data prompted investors to flee to safer-haven assets,
sending North American stock markets tumbling 2 percent. [.N]
[.TO]
 The fears spilled over to oil prices, which dropped more
than $2 a barrel, and to copper, which lost more than 1
percent. [O/R] [MET/L]
 "Just abysmal data ... yet another example of this very
sharp deceleration in U.S. data that makes people concerned
that the soft patch that we  went through in the first quarter
has spilled over into the second," said David Tulk, chief
Canada macro strategist at TD Securities.
 "Supply disruptions from the Japanese earthquake are
starting to take a greater toll on some of the data as well, so
it really is a lot of factors coming together that have really
dented the outlook for the U.S. economy where it is already
pretty vulnerable."
 Wednesday's private payrolls data hints at a weak U.S.
Labor Department jobs report on Friday, a key monthly driver of
financial markets given employment growth is one of the U.S.
Federal Reserve's two mandates.
 The Canadian dollar CAD=D4 ended the North American
session was at C$0.9757 to the U.S. dollar, or $1.0249, down
from C$0.9686 to the U.S. dollar, or $1.0324, at Tuesday's
close.
 Not helping matters, Moody's cut Greece's credit rating by
three notches on Wednesday to an extremely speculative level on
debt restructuring worries, and warned that more downgrades
could come. [ID:nLDE75038N]
 As well, earlier reports showed purchasing managers
indexes, measuring activity at thousands of factories across
the world, sank to multi-month lows in China and Europe, where
even regional pacesetters France and Germany showed signs of
sagging.
 Investors were assessing the gloomy global economic
landscape a day after the Canadian currency zoomed to its
highest level in more than a week on the back of a central bank
statement that was more hawkish than expected. [ID:nN31112740]
[CA/POLL]
 BONDS RALLY BUT REAL-RETURN AUCTION DISAPPOINTS
 Canadian bond prices soared alongside U.S. Treasuries amid
the risk-off backdrop. Canada's two-year bond CA2YT=RR
rallied 15 Canadian cents to yield 1.453 percent, the 10-year
bond CA10YT=RR advanced 74 Canadian cents to yield 2.991
percent, while the 30-year bond climbed 70 Canadian cents to
yield 3.459 percent.
 A C$700 million auction of 30-year real-return bonds
however was not as strongly received despite healthy demand for
inflation-protected debt.
 The 1.5 percent bonds due December 1, 2044, produced an
average yield of 0.995 percent. [ID:nTZO1HE74C]
 "It wasn't exceptionally well received. I think a lot of
people looked at it as being pretty expensive just looking at
the outright level of real yields, they're very very low," said
Tulk.
 "People who were trying to buy it, bought it ahead of the
auction so they got in a little bit earlier. It was more of
that dynamic."
 (Reporting by Claire Sibonney; editing by Rob Wilson)