CANADA FX DEBT-C$ hits 4-1/2-month low on Europe, China

* C$ briefly touches lowest since Jan. 9
    * Currency at C$1.0301 vs US$, or 97.08 U.S. cents
    * Bond prices climb; 30-year yield hits record low

    By Jennifer Kwan	
    TORONTO, May 30 (Reuters) - Canada's dollar skidded to a
four-and-a-half month low against its U.S. counterpart on
Wednesday on worries about Spain's ailing banking sector and
soaring borrowing costs, while China signaled it is not planning
a large stimulus package.	
    Spanish government borrowing costs edged higher and the
Madrid stock market hit a nine-year low, with investors rattled
by the parlous state of its banking sector fleeing to the
relative haven of German bonds. 	
    "Equity markets are negative across the board in Europe and
North America so risk sentiment is really not positive," said
Charles St-Arnaud, economist and currency strategist at Nomura
Securities in New York.	
    "There's concern about the banking sector in Spain given the
amount of recapitalization that their system may need. It'll be
a big hit on the fiscal situation in Spain." 	
    The Canadian dollar hit C$1.0312 versus the U.S.
dollar, or 96.97 U.S. cents, its weakest since Jan. 9. At around
10:30 a.m. (1430 GMT), it was at C$1.0301, down from Tuesday's
North American session close at C$1.0229 versus the U.S. dollar,
or 97.76 U.S. cents.	
    Market observers also said investors fled risk after China
signaled it does not need massive fiscal stimulus to stabilize
growth and calm investors fretting that the global economy may
slip back into a similar crisis as 2008-2009. 	
    "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."	
    Canada's currency outperformed its commodity-linked cousins
including the Australian and New Zealand dollar, but
underperformed most of its other G10 currency peers including
the Japanese yen.	
    Against the U.S. dollar, 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 9 Canadian cents to
yield 1.122 percent, while the benchmark 10-year bond
 climbed 79 Canadian cents to yield 1.790 percent.
The 30-year yield hit a record low of 2.326 percent.