* C$ draws support from surge in oil prices
* Improved market sentiment also pays key role
* Bond prices get hit by Citigroup rescue plan
By Frank Pingue
TORONTO, Nov 24 (Reuters) - The Canadian dollar jumped to its highest level in nearly a week on Monday as a surge in the price of oil and a rally in global equity markets took a bit of the shine off the U.S. dollar's recent safe-haven status.
Canadian bond prices ended down across the curve as news that the U.S. government had stepped in to prevent the collapse of Citigroup, the world's largest banking group, sparked intense demand for recently beaten down equities.
The Canadian dollar closed at C$1.2345 to the U.S. dollar, or 81.00 U.S. cents, up from C$1.2772 to the U.S. dollar, or 78.30 U.S. cents, at Friday's close.
The Canadian dollar's rally, which came after two losing weeks during which it shed a total of 7 percent, marked its biggest one-day percent gain in since Oct. 29.
A surge in the price of oil, a key Canadian export, and a rally in equity markets got credit for the currency's latest rise since it was lower oil prices and falling equities that had weighed on the currency in recent weeks.
The bid for stocks followed news that the U.S. government would bail out Citigroup by agreeing to shoulder most of the bank's potential losses.
The Canadian currency has been closely following moves in equity markets, where heavy losses had prompted a slew of risk-averse investors to embrace the greenback.
"Obviously a broad U.S. dollar soft tone today was part of the reason for the rally in the Canadian dollar, and we also saw oil prices firm up ... so that's probably the second leg of the source of support for the Canadian dollar," said Charmaine Buskas, senior economics strategist at TD Securities.
"Those have been the two big drivers drivers for the Canadian dollar going back for several weeks now and the reversal of those two factors just are really what's driving activity today,"
The dollar showed little interest in comments by Canadian Finance Minister Jim Flaherty, who said the country's economic picture is not improving and that it is reasonable that the economy could soon fall into recession.
Many market participants have long since accepted that Canada's economy will fall into a recession, which is usually defined as two straight quarters of economic contraction.
Canadian bond prices all ended lower along with a drop in the bigger U.S. Treasury market as the Citigroup rescue gave some relief to investors and left little interest in buying government debt.
"People are a little more upbeat and (there is) a little bit less risk worry, so bonds have given back a little bit of the hefty gains they scored last week," said Michael Gregory, senior economist at BMO Capital Markets.
But persistent fears about the unfolding credit crisis and the slowdown in the global economy cushioned the slide in bond prices.
The Canadian overnight Libor rate LIBOR01 was 2.3166 percent, down from 2.4833 percent on Friday.
Friday's CORRA rate CORRA= was 2.2430 percent, down slightly from 2.2437 percent on Thursday. The Bank of Canada publishes the previous day's rate at around 9 a.m. daily.
The two-year bond fell 4 Canadian cents to C$101.83 to yield 1.829 percent. The 10-year bond slid 33 Canadian cents to C$105.97 to yield 3.506 percent.
The yield spread between the two-year and 10-year bond was 166 basis points, down from 169 at the previous close.
The 30-year bond shed 45 Canadian cents to C$115.65 to yield 4.067 percent. In the United States, the 30-year Treasury yielded 3.784 percent. (Reporting by Frank Pingue; editing by Peter Galloway)