CANADA FX DEBT-C$ gains after higher-than-expected GDP growth

* Canadian dollar at C$1.2460 or 80.26 U.S. cents
    * Bond prices lower across the maturity curve

    By Solarina Ho
    TORONTO, March 3 (Reuters) - The Canadian dollar
strengthened sharply against its U.S. counterpart on Tuesday
after data showed the economy grew at a faster pace than
forecast during the fourth quarter, reinforcing expectations
that the Bank of Canada will likely keep interest rates on hold.
    Consumer spending and a build up in inventories offset a
decline in exports, putting the annualized rate for gross
domestic product at 2.4 percent, higher than the 2 percent
economists had expected. Still, the figure was a step down from
an upwardly revised 3.2 percent in the third quarter.
    "The Canadian dollar has seen a positive reaction in the
aftermath. I think personally as an FX strategist I would be
fading the move and using it as an opportunity to sell the
Canadian dollar," said Greg Moore, senior currency strategist at
RBC Capital Markets.
    The Canadian dollar, which was outperforming nearly
all of its major currency counterparts, was trading at C$1.2460
to the greenback, or 80.26 U.S. cents at around 9:14 a.m. (1414
GMT), stronger than Monday's finish at C$1.2535, or 79.78 U.S.
cents. Earlier, it touched its firmest level of the session at
C$1.2434, or 80.42 U.S. cents.
    The data supports expectations the Bank of Canada will keep
rates on hold when it makes its next monetary policy
announcement on Wednesday. Markets were pricing in about a 20
percent chance of a 25 basis point cut, down from around a 25
percent chance prior to news. 
    "The encouraging revisions and a decent hand off into Q1 I
think does keep us with a better-than-feared outcome for the
Canadian economy," said David Tulk, chief Canada macro
strategist at TD Securities.
    Canadian government bond prices were lower across the
maturity curve, with the two-year falling 6.5
Canadian cents to yield 0.526 percent and the benchmark 10-year
 losing 23 Canadian cents to yield 1.396 percent.

 (Additional reporting by Allison Martell; Editing by Meredith