CANADA FX DEBT-C$ rises on stock rally, Bank of Canada

Thu Sep 10, 2009 11:56am EDT
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 * Canadian dollar hits session high as stocks rally
 * Gets support from central bank comments
 * Bonds higher, main focus on new issues
 (Adds details, updates prices)
 By Ka Yan Ng
 TORONTO, Sept 10 (Reuters) - The Canadian dollar CAD=D3
turned stronger against the U.S. currency on Thursday,
mirroring gains on Toronto's equity market and supported by the
Bank of Canada's upgrade of its economic growth outlook.
 The Bank of Canada kept its overnight rate unchanged at
0.25 percent, as expected, on Thursday and repeated its pledge
to keep it there until the second half of 2010. It also said
second half growth could be stronger than previously thought.
 The central bank once again warned that "persistent
strength in the Canadian dollar" remains a risk to the economic
recovery and to inflation. But its language on the currency was
no tougher than in recent statements and speeches.
 "We did see the currency strengthen somewhat but not in a
huge way," said Doug Porter, deputy chief economist at BMO
Capital Markets.
 "I think perhaps the currency market was a bit relieved
that there wasn't a stronger statement (on the Canadian dollar)
and it may have benefited from their upward adjustment in their
growth call."
  A more than 1 percent rise on Toronto's main stock index
on a rally by resource shares  [ID:nTOR004956] also helped the
Canadian dollar hit its highest level for the North American
session at C$1.0795 to the U.S. dollar, or 92.64 U.S. cents.
 But that was still short of its overnight peak of C$1.0776
to the U.S. dollar, or 92.80 U.S. cents.
 At 11:27 a.m. (1527 GMT), the Canadian dollar was at
C$1.0808 to the U.S. dollar, or 92.52 U.S. cents, up slightly
from Wednesday's close at C$1.0810 to the U.S. dollar, or 92.51
U.S. cents.
 Canadian government bonds were higher across the curve,
helped initially buy a weaker tone on global stock markets and
extending gains slightly after the Bank of Canada's
 But analysts said the spotlight was on a recent wave of new
debt and equity issues.
 "Since everyone came back from Labor Day holidays, there's
been just a flood of new issuance in North America. That is
where I think most of the focus is right now, just a really
healthy market for primary debt and equity issuance," said   
Sheldon Dong, fixed income analyst, at TD Waterhouse Private
 "So the secondary market trading is in the background."
 Recent issues include share offerings from Barrick Gold
(ABX.TO: Quote) and Fairfax Financial Holdings Ltd (FFH.TO: Quote), while
Royal Bank of Canada (RY.TO: Quote) said it may raise up to $15
billion in debt or preferred shares.
 The two-year bond CA2YT=RR was up 5 Canadian cents at
C$99.57 to yield 1.222 percent, while the 10-year bond
CA10YT=RR gained 40 Canadian cents to C$103.15 to yield 3.366
 The 30-year bond CA30YT=RR rose 75 Canadian cents to
C$118.50 to yield 3.901 percent.
 Canadian bonds mostly underperformed their U.S.
counterparts. The Canadian 10-year bond yield was 4.5 basis
points below its U.S. counterpart, compared with 6.3 basis
points on Wednesday.
 (Editing by Peter Galloway)