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