CANADA FX DEBT-C$ flat in mid-range as rate bets reign

 (Adds currency strategist comment, updates prices)
    * Canadian dollar at C$1.2733, or 78.54 U.S. cents
    * Bond prices slightly higher across the maturity curve
    * Market pricing 57 pct chance Bank of Canada hikes in
    * Loonie heads into 2018 in middle of recent C$1.25-C$1.30

    By Alastair Sharp
    TORONTO, Dec 22 (Reuters) - The Canadian dollar headed into
2018 stuck in the middle of a recent range, with traders and
economists torn on whether the Bank of Canada will hike rates in
January or wait until March or April, and whether it will
out-tighten the Fed over time.
    The loonie was little changed against the greenback on
Friday as trade wound down ahead of the Christmas break, with
stalled economic growth data for October challenging inflation,
trade and retail sales data from earlier in the week that had
made a January hike a 50:50 call.             
    The Canadian central bank raised rates twice in 2017, in
July and September, while the U.S. Federal Reserve hiked in
March, June, and December. 
    "What the market seems to be pricing now, as best as I can
tell, is that Bank of Canada is going to actually out-hike the
Fed next year and flatten the gap in cash rates to zero," said
Daniel Katzive, head of North American currency strategy at BNP
Paribas, adding that seemed "aggressive given the NAFTA
    Negotiators for Canada, the United States and Mexico will
meet in Montreal from Jan. 23-28 for North American Free Trade
Agreement talks on thorny subjects such as autos, dispute
settlement and an expiry clause, while the Bank of Canada's next
rate decision is due on Jan. 17.             
    At 1:30 p.m. EST (1830 GMT), the Canadian dollar         
was trading at C$1.2733 to the greenback, or 78.54 U.S. cents,
slightly stronger on the day. It traded between C$1.2697 and
C$1.2797, and was up more than 1 percent on the week.
    BNP Paribas' Katzive said their models point to long-term
equilibrium at C$1.27, and to push outside C$1.25-C$1.30 would
require one of the central banks to significantly out-tighten
the other. Along with a neutral view on range-bound oil, that
made him "quite aggressively neutral on the dollar-Canada
outlook," he said.
    Canadian government bond prices were slightly higher across
the maturity curve, with the two-year            up 3 Canadian
cents to yield 1.662 percent and the benchmark 10-year
            rising 4 Canadian cents to yield 2.026 percent.    
    The spread between yields on Canadian and U.S. two-year
bonds was -23.3 basis points, near its tightest in more than a
month. The Canadian issue traded at a premium to its U.S.
counterpart in September and early October.
    The Canadian bond market closed at 1:30 p.m. ahead of the
Christmas break, while U.S. trading wound down at 2 p.m.    

 (Reporting by Alastair Sharp, Editing by Rosalba O'Brien)