CANADA FX DEBT-C$ edges lower ahead of Fed decision

    * Canadian dollar at C$1.3726, or 72.85 U.S. cents
    * Bond prices slightly higher across the yield curve
    * 2-year spread vs Treasuries touches its widest in 10 years

    TORONTO, May 3 (Reuters) - The Canadian dollar weakened
slightly against its U.S. counterpart on Wednesday, maintaining
its recent defensive bias as investors braced for an interest
rate decision from the Federal Reserve.
    The Fed is expected to hold interest rates steady as it
pauses to parse more economic data, but it may hint it is on
track for an increase in June.             
    In contrast, the funding crisis at mortgage lender Home
Capital may spark a welcome cooling in Canada's housing market
and take pressure off the Bank of Canada to raise interest
    Toronto home prices and new listings surged in April from a
year earlier while sales fell, the Toronto Real Estate Board
said, suggesting the market may be starting to rebalance after
new housing rules were put it place amid fears of a bubble in
Canada's largest city.             
    At 9:15 a.m. ET (1315 GMT), the Canadian dollar          was
trading at C$1.3726 to the greenback, or 72.85 U.S. cents, down
0.1 percent.
    The currency traded in a range of C$1.3704 to C$1.3740. On
Tuesday it had slumped to a fresh 14-month low at C$1.3758.
    U.S. tariffs on Canadian softwood lumber, a more uncertain
outlook for the North American Free Trade Agreement and lower
oil prices have weighed recently on the loonie.
    But prices of oil, one of Canada's major exports, rebounded
from near 2017 lows after preliminary data showed a much
larger-than-expected fall in U.S. crude stocks, reviving bullish
sentiment about easing oversupply.             
    U.S. crude        prices were up 0.27 percent at $47.79 a
    Canadian government bond prices were slightly higher across
the yield curve, with the two-year            up 1 Canadian cent
to yield 0.674 percent and the 10-year             rising 5
Canadian cents to yield 1.51 percent.
    The 2-year yield fell 2.4 basis points further below its
U.S. equivalent to a spread of -60.7 basis points, its widest
since April 2007.
    Canada's trade report for March is due on Thursday, and the
April employment report is due on Friday.            

 (Reporting by Fergal Smith; Editing by Nick Zieminski)