CANADA FX DEBT-C$ rises with oil as greenback slips ahead of Fed decision

    * Canadian dollar at C$1.2841, or 77.88 U.S. cents
    * U.S. crude        prices rise 0.7 percent
    * Bond prices mixed across the yield curve
    * Canada-U.S. 10-year spread narrows by 2.8 basis points

    TORONTO, Dec 13 (Reuters) - The Canadian dollar strengthened
against its U.S. counterpart on Wednesday as oil rose, while
American inflation data pressured the greenback ahead of an
expected interest rate increase by the Federal Reserve.
    The price of oil, one of Canada's major exports, climbed as
industry data showed a larger-than-expected drawdown in U.S.
crude stockpiles, while expectations for an extended shutdown of
a major North Sea crude pipeline also continued to bolster
    U.S. crude        prices were up 0.7 percent at $57.55 a
    The U.S. dollar        fell against a basket of major
currencies after data showed a rise in core inflation that was
short of economists' forecasts.
    At 8:49 a.m. ET (1349 GMT), the Canadian dollar          was
trading at C$1.2841 to the greenback, or 77.88 U.S. cents, up
0.2 percent. The currency traded in a range of C$1.2822 to
    On Tuesday, the loonie touched its weakest since Dec. 1 at
C$1.2893. It had been pressured by the Bank of Canada's dovish
tone last week after it left its benchmark interest rate steady
at 1 percent.
    Bank of Canada Governor Stephen Poloz is due to speak on
    Canadian home prices fell again in November, the third
straight monthly decline and the largest November drop outside
of a recession, as Toronto prices fell for the fourth month and
Vancouver prices were flat, data showed on Wednesday.
    Canadian government bond prices were mixed across the yield
curve, with the two-year            down 1.5 Canadian cents to
yield 1.529 percent and the 10-year             flat to yield
1.866 percent.
    The gap between the 10-year yield and its U.S. equivalent
narrowed by 2.8 basis points to a spread of -50.8 basis points.
    On Tuesday, the spread touched its widest since July at
-53.7 basis points.

 (Reporting by Fergal Smith; Editing by Jonathan Oatis)