CANADA FX DEBT-C$ dips, bonds fall; focus on Bank of Canada

Fri Apr 17, 2009 4:57pm EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article
[-] Text [+]

 * C$ falls, but books third consecutive weekly gain
 * Bond prices driven lower by supply fears, rising stocks
 * Annual inflation eases in March, core higher
 * Focus on next week's Bank of Canada rate decision, MPR
 (Adds details and comments)
 By Ka Yan Ng
 TORONTO, April 17 (Reuters) - The Canadian dollar fell
against the U.S. dollar on Friday as market players prepared
for next week's Bank of Canada interest rate decision and the
bank's outline of alternative steps it could take to stimulate
the slumping economy.
 The Canadian currency finished at C$1.2150 to the U.S.
dollar, or 82.30 U.S. cents, down from C$1.2096 to the U.S.
dollar, or 82.67 U.S. cents, at Thursday's close. Despite the
pullback, the currency finished 0.8 percent higher on the week,
its third straight week of gains.
 "There are some event risks, uncertainties that exist
around quantitative easing measures potentially being put forth
by the Bank of Canada next week," said Jack Spitz, managing
director of foreign exchange, at National Bank Financial.
 "Some of the long Canada positions that have been built up
over the course of the past week are being squared up ahead of
the events."
 Canadian inflation data released on Friday did little to
change expectations that the Bank of Canada could soon take
additional measures beyond interest rate cuts to lift Canada's
sagging economy.
 The data showed Canada's annual inflation rate slowed to
1.2 percent in March from 1.4 percent in February, but the core
rate closely watched by the central bank unexpectedly rose to 2
percent. [ID:nN17500487]
 The Bank of Canada will announce its interest rate decision
on April 21. Most primary dealers expect it to hold its key
rate steady at 0.50 percent and will watch for hints on whether
the central bank plans to introduce quantitative or credit
easing measures. [ID:nTOR004440]
 The central bank's Monetary Policy Report, due April 23, is
expected to lay out a framework for nonstandard policy measures
to stimulate the economy.
 BOND PRICES SLUMP
 Canadian bond prices were hit by a combination of rising
North American stock markets and concern about new U.S.
supply.
 "You're getting more people willing to switch into risk,"
said Sheldon Dong, fixed income analyst at TD Waterhouse
Private Investment.
 Equity markets booked their sixth straight week of gains,
rising in response to improved sentiment about global prospects
for an economic recovery.
 Also, Canadian bond prices tracked U.S. Treasuries, which
were under pressure from worries about a surge of U.S. supply
hitting the market at the end of the month.
 Next week's Bank of Canada events were also high on the
radar of fixed income market participants. Dong said it was
difficult to predict how the market will react to a framework
on unconventional policy measures by the Bank of Canada until
specifics are laid out.
 "The devil is in the details," he said.
 The two-year bond fell 9 Canadian cents to C$100.18 to
yield 1.163 percent, while the 10-year bond declined 57
Canadian cents to C$106.30 to yield 3.021 percent.
 The 30-year bond shed C$1.00 to C$121.55 to yield 3.753
percent. In the United States, the 30-year Treasury yielded
3.796 percent.
 Canadian bonds outperformed their U.S. counterparts across
the curve, with the 30-year bond 4.3 basis points below its
U.S. counterpart, compared to 2 basis points on Thursday.
 (Reporting by Ka Yan Ng; editing by Peter Galloway)