CANADA FX DEBT-C$ strengthens on Bank of Canada surveys

Mon Jul 13, 2009 5:08pm EDT
 
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 * C$ rises to finish at C$1.1518 to the U.S. dollar
 * Bank of Canada surveys offer support
 * North American stock market rises also boost C$
 * Bonds lower across curve
 (Adds details, quotes)
 By Jennifer Kwan
 TORONTO, July 13 (Reuters) - Canada's dollar strengthened
against the greenback on Monday, helped by rallying equity
markets and a pair of Bank of Canada surveys that showed signs
of improved business sentiment.
 Lending conditions in Canada continued to tighten in the
second quarter, according to the central bank surveys of
businesses and senior loan officers, but the number of
respondents pointing to tighter conditions declined and signals
of business conditions brightened. [ID:nN13381629]
 The surveys seemed to reinforce other data suggesting the
recession may have hit bottom, and that companies may face
fewer hurdles in getting financing in coming quarters.
 "In general, given the positive aspects of those reports we
have seen some interest to buy Canadian dollars," said George
Davis, chief technical strategist at RBC Capital Markets.
 Another factor helping the currency higher was a rally in
Toronto's main stock index, which bounced off a steep drop in
early action and finished up 1.5 percent after a prominent U.S.
banking analyst upgraded Goldman Sachs Group GS.N, boosting
financial shares in Canada as well as the United States.
[ID:nN13211783]
  "There's a return of risk appetite," said Sal Guatieri,
senior economist BMO Capital Markets.
 "Investors are buying equities and taking another look at
some of the second-tier currencies, so that's helping the
Canadian dollar."
 The Canadian unit finished at C$1.1518 to the U.S. dollar,
or 86.82 U.S. cents, up from C$1.1647 to the U.S. dollar, or
85.86 U.S. cents, at Friday's close.
 The Canadian dollar may have risen further if not for a
drop in prices oil, a key Canadian export, which settled below
$60 a barrel on concerns over the state of the global economy.
[ID:nSYD73698]
 BONDS LOWER ACROSS THE CURVE
 Canadian bond prices were lower across the curve as money
flowed out of safe-haven investments, mirroring the U.S.
Treasury debt market, where prices also dropped.
[ID:nN13582348]
 "The bond markets are under pressure because of the renewed
risk appetite for equities," Guatieri said.
 The two-year Canada bond was down 4 Canadian cents at
C$100.13 to yield 1.182 percent, while the 10-year bond fell 33
Canadian cents to C$103.62 to yield 3.317 percent.
 The 30-year bond dropped 75 Canadian cents to C$118.55 to
yield 3.902 percent. In the United States, the 30-year Treasury
yielded 4.2432 percent.
 Canadian bonds mostly outperformed U.S. Treasuries across
the curve. The Canadian 30-year bond was 34 basis points below
the U.S. 30-year yield, compared with about 33 basis points
below on Friday.
 (Reporting by Jennifer Kwan; editing by Peter Galloway)