CANADA FX DEBT-C$ recovers vs dollar after Trump's trade comments

 (Recasts, adds comment, updates prices)
    * U.S. dollar down 0.1 percent vs Canada
    * Trumps says may do bilateral deals with Canada, Mexico 
    * Spread between the U.S.-Canadian 10-year yields widens 

    By Gertrude Chavez-Dreyfuss
    July 18 (Reuters) - The Canadian dollar rose against the
U.S. dollar on Wednesday, reversing earlier losses, after
President Donald Trump said he may negotiate separate trade
deals with Mexico and Canada.
    This is not the first time that Trump had suggested
bilateral deals with Mexico and Canada, as he vowed to revamp
the 24-year old North American Free Trade Agreement (NAFTA).
Analysts said Trump first brought up the idea back in May and
June, but Canada and Mexico stuck together.
    On Wednesday, Trump repeated it again.
    "We have had very good sessions with Mexico and with the new
president of Mexico, who won overwhelmingly, and we're doing
very well on our trade agreement," Trump told reporters ahead of
a meeting of his cabinet at the White House.
    "So we'll see what happens. We may do a deal separately with
Mexico and we'll negotiate with Canada at a later time. But
we're having very good discussions with Mexico."             
    Greg Anderson, global head of foreign exchange strategy at
BMO Capital Markets in New York, said Trump's comments suggested
that "he's hungry for a deal and a deal (NAFTA) is much closer 
than what we have presupposed."
    "If Trump thinks he could get a deal with Mexico, it kind of
says he has a weaker hand," Anderson added.
    In afternoon trading, the U.S. dollar was down 0.1 percent
at C$1.3177          against the Canadian unit. So far this
year, the Canadian dollar has been down 4.7 percent against a
strong U.S. currency.
    The U.S. dollar, however, was still up 0.2 percent on the
day against a basket of six major currencies at 95.075       .
    The Canadian dollar, meanwhile, reversed earlier losses
against the euro, which fell 0.3 percent to C$1.5341          .
Sterling also extended losses, falling 0.6 percent to C$1.7206
    Weaker commodity prices earlier pressured the Canadian
dollar, a commodity-based currency, but U.S. crude futures
recovered in the afternoon session, trading up 1.2 percent at 
$68.93 per barrel       . 
    Meanwhile, Canadian government bond prices were lower across
the curve and yields were higher in line with U.S. Treasuries.
    The two-year yield            rose to 1.930 percent,
compared with 1.918 percent late on Tuesday, while the 10-year
            was up at 2.141 percent from Tuesday's 2.123
    The spread between the U.S. 10-year Treasury and Canadian
10-year yields has widened on Wednesday to nearly 76 basis
points              . The yield gap has been widening since the
beginning of the year in favor of the U.S. dollar. 

 (Reporting by Gertrude Chavez-Dreyfuss in New York
Editing by Marguerita Choy and James Dalgleish)