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* C$ firms to C$0.9867, or $1.0135
* Currency strengthens as Greek default fears ease
* Recovery of oil from session lows also supports
* Bond prices mostly weaker, but Canada outperforms
By Trish Nixon
TORONTO, June 27 (Reuters) - The Canadian dollar strengthened on Monday, rebounding from a 3-month low hit early in the session, as new developments in Europe helped ease fears of a Greek government debt default.
France offered a solution for banks to roll over holdings of Greek debt for 30 years, while the Greek government fought to get back-bench rebels to back a crucial austerity plan to avert bankruptcy. [ID:nLDE75P0BM]
The move helped send the euro higher against the U.S. dollar, which had been benefiting from safe-haven flows. [FRX/]
"The euro seems to have been doing a little bit better this afternoon, so the Canadian dollar might be riding a slightly less positive sentiment for the US dollar in the latter part of the day," said Avery Shenfeld, chief economist at CIBC World Markets.
The Canadian dollar was also helped by a recovery in the price of oil from session lows as the news from Europe fed through to energy markets. U.S. August crude CLQ1 was still down 55 cents to $90.61 a barrel. [O/R]
"With (oil) bouncing back after cracking that $90 barrier it definitely showed that Canada should hold its recent ranges," said C.J. Gavsie, managing director of foreign exchange sales at BMO Capital Markets. "If oil continues to track south we definitely are going to be moving (weaker)."
The Canadian dollar earlier on Monday slid to C$0.9914 to the U.S. dollar, or $1.0087, its weakest level since March 17.
The currency CAD=D4 closed at C$0.9867 to the U.S. dollar, or $1.0135, slightly firmer than Friday's North American finish at C$0.9870 to the U.S. dollar, or $1.0132.
Shenfeld said that he expects the Canadian dollar to be weaker over the next month or two in the face of generally soft economic data.
But he added that if Greece manages to pass a fiscal tightening bill by the end of the week "there will probably be a bit of a rally towards risk related currencies including the Canadian dollar."
Canadian bond prices were mostly lower, mirroring losses in U.S. Treasuries, which were hurt by the easing in concerns about the risk of a Greek debt default. [US/]
The two-year Canadian government bond CA2YT=RR fell 6 Canadian cents to yield 1.415 percent. The 30-year bond CA10YT=RR fell more than a point to yield 3.418 percent.
Canadian bonds mostly outperformed their U.S. counterparts in the downturn, with the difference in yield between the 30-year benchmarks widening to 88 basis points from 82.3 on Friday. (Editing by Jeffrey Hodgson)