CANADA FX DEBT-C$ rises with risk tolerance, bonds mixed

Mon Mar 23, 2009 10:34am EDT
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 * C$ rises as risk appetite grows with US toxic asset plan
 * No direct currency impact from Suncor-Petrocan deal
 * Bonds mixed, focus on supply
 TORONTO, March 23 (Reuters) - The Canadian dollar rose
against the U.S. dollar on Monday morning as risk appetite
sharpened on news of a U.S. plan to help rid banks of toxic
 The U.S. Treasury Department rolled out detailed plans to
persuade private investors to help it take up as much as $1
trillion in bad assets now choking bank balance sheets.
 The news, leaked over the weekend, put a positive tone on
overseas equity markets and the effect spilled over to the open
in North America. U.S. Treasury Secretary Timothy Geithner said
that the private sector must be willing to take on some risk
for his bank asset cleansing plan to work.
 Further support for the Canadian dollar came from oil
prices, which rose above $52 a barrel on Monday. Canada is a
big oil producer and explorer.
 At 10:05 a.m. (1405 GMT), the currency was at C$1.2333 to
the U.S. dollar, or 81.08 U.S. cents, up from C$1.2395 to the
U.S. dollar, or 80.68 U.S. cents, at Friday's close.
 "The market is still getting its collective head around
Geithner's plan," said Jack Spitz, managing director of foreign
exchange at National Bank Financial.
 "There's still a fair bit of uncertainty in the air...but
the plan has been unveiled and the market is looking at it
marginally positive."
 The currency was little swayed by a steeper-than-expected
drop in Canada's composite leading indicator. A sharp downturn
in the housing market and the auto industry as well as in stock
prices helped push the composite leading indicator down 1.1.
percent in February. [ID:nN23482377]
 An all-stock C$18.43 billion merger of Canadian oil
companies Suncor Energy SU.TO and Petro-Canada PCA.TO lent
support to Toronto stocks, but had no direct impact on the
Canadian currency. [ID:nN22497404]
 Still, the Canadian dollar has been trading firmly in the
C$1.23 and C$1.24 range for three straight sessions. The
breakout for dollar/Canada ultimately should be at the next
support level at C$1.2190, Spitz said.
 Canadian bond prices were mixed on Monday with the short
end lower as another week of huge supply south of the border
was waiting to be absorbed and as equities rallied strongly.
 Bond prices tend to fall when stock prices rise, but market
players were more focused on the U.S. Treasury, which will sell
about $158 billion in new debt this week, than on the
longer-term toxic asset plan.
 "It's supply and demand. It's a big, big week for U.S.
issuance," said Sheldon Dong, fixed income analyst at TD
Waterhouse Private Investment. "All these plans are fine and
dandy longer term but the key concern right now is supply."
 The short-dated two-year bond was down 3 Canadian cents at
C$102.87 to yield 1.029 percent. The 10-year bond rose 21
Canadian cents to C$109.06 to yield 2.725 percent.
 The 30-year bond rose 40 Canadian cents to C$124.85 to
yield 3.591 percent. The U.S. 30-year bond yielded 3.647
 (Reporting by Ka Yan Ng; Editing by Peter Galloway)