March 23, 2009 / 2:38 PM / 9 years ago

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

 * 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 assets.
 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. [ID:nnN23195140]
 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.
 BONDS MIXED
 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 percent.  (Reporting by Ka Yan Ng; Editing by Peter Galloway)                               

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