CANADA FX DEBT-Disappointing data dents C$, lifts bonds

Thu Jun 17, 2010 4:52pm EDT
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 * C$ falls to 97.37 U.S. cents
 * Bond prices turn higher after data
 * Canada to hold 7 bond auctions in July-Sept qtr
 * Canada to up frequency of cash management bond ops
 (Updates to close)
 By Ka Yan Ng
 TORONTO, June 17 (Reuters) - The Canadian dollar fell on
Thursday, while bonds charged higher, as investors became more
guarded after several data releases suggested a tepid economic
 Earlier, the Canadian dollar climbed as investors took on
more risk following Spanish bond issues that drew strong
demand, which kept concerns about Europe's debt troubles at
bay. [ID:nLDE65G1HJ]
 It had reached a session high at C$1.0224 to the U.S.
dollar, or 97.81 U.S. cents, before sentiment shifted.
 The Canadian currency finished at C$1.0270 to the U.S.
dollar, or 97.37 U.S. cents, down from Wednesday's finish at
C$1.0254 to the U.S. dollar, or 97.52 U.S. cents.
 "It's a big underperformer on the day. We can attribute
that to the weak read on the Philadelphia Fed index and
probably because oil is down today," said Sacha Tihanyi,
currency strategist at Scotia Capital.
 The Philadelphia Fed index showed factory activity in the
mid-Atlantic region braked to its slowest pace in 10 months in
June. [ID:nN17207354] [ID:nN17254724]
 Disappointing wholesale trade figures for April in Canada
and an unexpected rise in new weekly U.S. claims for jobless
aid put pressure on the Canadian currency.
 Also, U.S. consumer prices notched their largest decline in
nearly 1-1/2 years in May.
 The soft data also took its toll on other markets, such as
oil and equities, which are often influential to the movement
in Canada's currency. Oil was off more than 1 percent to settle
below $77 a barrel. North American equity markets finished with
mild gains.
 "It feels like the market is generally taking a more
cautious turn again," said Eric Lascelles, chief Canada macro
strategist, at TD Securities.
 "Part of it is the U.S. economic figures are looking soft,
which is raising some doubt about the global recovery."
 Canadian government bond prices were lifted by the day's
disappointing economic data.
 Spain's auction of 3.5 billion euros of bonds was taken in
stride, easing concerns it may face a Greek-style debt crisis,
but a huge question mark still hangs over the outlook for
sovereign debt.  [ID:nLDE65G1HJ]
 "How many more countries have deficits to become more
transparent. More importantly, even if we know in absolute
terms the deficits that are out there ... just because you get
an auction at a reasonable level of pricing it's a question of
whether the price is correct," said Simon Ballard, senior
credit strategist at RBC Capital Markets.
 "Bottom line is that the euro zone needs restructuring in
order to get away from the inherent problems it has."
 The two-year government bond CA2YT=RR jumped 9 Canadian
cents to yield 1.725 percent, while the 10-year bond
CA10YT=RR gained 42 Canadian cents to yield 3.307 percent.
 Canadian bonds put in a mixed performance against U.S.
Treasuries, with the short-end outperforming but the long-end
 The Canadian 10-year bond yield was 10.7 basis points above
its U.S. counterpart, compared with 9.3 basis points on
 The Bank of Canada also released its quarterly bond auction
schedule, saying it will hold seven bond auctions, including
one real return issue, in the July-September quarter of 2010.
 It also said it would increase the frequency of
cash-management bond buyback operations on a pilot basis,
beginning in August. [ID:nTOR007588]
 (Additional reporting by Jennifer Kwan and Pav Jordan;
Editing by Mario Di Simine)