CANADA FX DEBT-C$ dips on Europe, China disappointments

* C$ down at C$1.0256 vs US$, or 97.50 U.S. cents
    * Bond prices climb across the curve

    By Claire Sibonney	
    TORONTO, May 30 (Reuters) - The Canadian dollar eased
against the greenback on Wednesday as concerns grew about
Spain's ailing banking sector and soaring borrowing costs, and
after Italy was forced to pay dearly to sell debt.	
    Markets were also let down after China signaled it is not
planning a large stimulus package, in line with the view of
Chinese policy advisers. 	
    "The news flow overnight has not been particularly
encouraging, so a lot of uncertainty still within Europe and
pressure on the peripheral bond markets," said Shaun Osborne,
chief currency strategist at TD Securities.	
    "I think China downplaying again the potential for stimulus
measures have also contributed to this sort of risk-off
undertone for the markets but it's really about watching the
headlines and watching what's going on in Europe."	
    Spain is expected to issue new bonds soon to fund its ailing
banks and indebted regions despite its borrowing costs nearing
the unsustainable 7 percent level that forced other euro zone
countries to seek international aid. 	
    Adding to the euro's woes, Italy sold bonds at a very high
cost, with 10-year yields topping 6 percent for the first time
this year as sentiment on the indebted economy looked vulnerable
to contagion from Spain's worsening problems. 	
    At 7:53 a.m. (1153 GMT), the Canadian dollar stood
at C$1.0256 versus the U.S. dollar, or 97.50 U.S. cents, down
from Tuesday's North American session close at C$1.0229 versus
the U.S. dollar, or 97.76 U.S. cents.	
    Osborne noted that the commodity currencies such as Canada's
were generally underperforming but the Canadian dollar has
potential to outperform on the crosses due to its close
association with the United States.	
    He said euro/Canada and Aussie/Canada 
in particular "look ripe for some Canadian dollar appreciation."	
    Against the U.S. dollar however, Osborne cautioned that the
Canadian dollar could slip to the C$1.05 or C$1.06 area in the
next month or two given the Canadian dollar has weakened five
big figures, from C$0.98 to C$1.03, in the last four weeks.	
    Later in the week, the closely watched U.S. jobs report and
Canadian growth numbers will provide further direction for
currency traders.	
    Canadian government bond prices picked up across the curve
with Canada's two-year bond up 6 Canadian cents to
yield 1.136 percent, while the benchmark 10-year bond
 climbed 46 Canadian cents to yield 1.824 percent.