CANADA FX DEBT-C$ shows resilience, bond prices firm

Thu Nov 26, 2015 4:35pm EST
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(Adds analyst quotes, updates prices, adds details)
    * Canadian dollar at C$1.3294, or 75.22 U.S. cents
    * Bond prices higher across maturity curve

    By Fergal Smith
    TORONTO, Nov 26 (Reuters) - The Canadian dollar edged
slightly higher against the U.S. dollar on Thursday, showing
resilience in the face of lower crude oil prices, while bond
prices firmed in thin markets due to the U.S. Thanksgiving Day
    The loonie, as Canada's currency is colloquially known,
rebounded from a C$1.3324 session low, but stalled ahead of
Wednesday's high at C$1.3280, with the market "really looking
for direction," according to David Tulk, chief Canada macro
strategist at Toronto-Dominion Bank, as the focus turns to a
Bank of Canada rate decision next week.
    The Bank of Canada is widely expected to remain on hold.
    Oil prices fell after six sessions of gains, as concern
faded that escalating violence in the Middle East would disrupt
    The Canadian dollar closed at C$1.3294 to the greenback, or
75.22 U.S. cents, slightly firmer than Wednesday's official
close of C$1.3296, or 75.21 U.S. cents.
    Bonds have been "carrying on some of the momentum we have
seen in recent days," said Tulk, consistent with the "seasonal
dynamic" in anticipation of Dec. 1 coupon and maturity payments.
    Canadian government bond prices were higher across the
maturity curve, with the two-year price up 1.5
Canadian cents to yield 0.623 percent and the benchmark 10-year
 rising 21 Canadian cents to yield 1.567 percent.
    The curve flattened, as the spread between the 2-year and
10-year yields narrowed by 1.7 basis points to 94.4 basis
points, extending recent outperformance for 10-year bonds.
    Canadian non-farm payrolls rose 30,700 in September after
falling 34,100 in August, according to the Survey of Employment,
Payrolls and Hours released by Statistics Canada, but remain
"consistent with a subdued labour market," said Tulk.
    The data is seen as less timely than the closely watched
labour force survey and had little impact on the market.
    The C.D. Howe Institute Monetary Policy Council called for
the Bank of Canada to remain on hold at 0.50 percent next week,
but to hike to 0.75 percent by next November.
    Ontario released its budget update, forecasting a smaller
than previously anticipated deficit of C$7.52 billion, helped by
the initial public offering of utility Hydro One Ltd.
    Quebec reaffirmed in its budget update that it is on track
to return to balance this fiscal year. 
    Brent crude settled down 71 cents at $45.46 a
barrel, while U.S. crude prices were last at $42.51 a
barrel, down 1.25 percent. 

 (Reporting by Fergal Smith, editing by G Crosse and Nick