Canadian bonds surge as investors seek safe haven
*Canadian bond market set for more gains on safety bid
*Canadian dollar slips 1.1 percent against greenback
*Chance of rate cut seen jumping as uncertainty rises
TORONTO, Sept 29 (Reuters) - Canadian bond prices rallied on Monday as investors exited equities en masse after U.S. lawmakers rejected the proposed $700 billion bailout package for the ailing financial sector.
A plunge in energy prices weighed on the commodity-linked Canadian dollar, which had fallen 1.1 percent against the U.S. dollar by the end of the North American session.
The Toronto Stock Exchange closed down 840 points, with 300 points evaporating in just a few minutes after the U.S. House of Representatives rejected the U.S. Troubled Asset Relief Program See [ID:nLT436737], which was intended to bring relief to the financial sector and get credit markets moving again.
The uncertainty fueled a powerful rally in the bond market as investors sought relatively secure government debt.
"This bill was more or less assumed to go through. Now that it hasn't it's left a big question mark as to what the (U.S.) Treasury will do, so there's really a massive flight to safety," said Charmaine Buskas, senior economics strategist at TD Securities.
She said the bond market was likely set for more gains as as long as the uncertainty remains. Continued...