CANADA FX DEBT-C$ notches 2-week high as yield spreads narrow

    * Canadian dollar at C$1.3091, or 76.39 U.S. cents
    * Loonie touches its strongest since July 11 at C$1.3086
    * Bond prices lower across a flatter yield curve
    * Canada-U.S. 2-year spread hits narrowest since July 9

    TORONTO, July 25 (Reuters) - The Canadian dollar
strengthened to a two-week high against its U.S. counterpart on
Wednesday as the greenback broadly fell and the gap between
Canadian and U.S. yields narrowed.
    The gap between Canada's 2-year yield and its U.S.
counterpart narrowed by 2.4 basis points to a spread of -62.5
basis points, its narrowest since July 9.
    The smaller spread, which comes after recent
stronger-than-expected domestic data, reduces the incentive for
investors to buy higher-yielding bonds denominated in U.S.
    The U.S. dollar        fell against a basket of major
currencies ahead of talks between U.S. President Donald Trump
and European Commission President Jean-Claude Juncker that are
expected to focus on trade.              
    Trump has threatened to impose tariffs on EU-made cars. He
has also warned he would impose tariffs on Canadian autos. Autos
are one of Canada's major exports.
    Canada is also contending with slow-moving talks to revamp
the North American Free Trade Agreement.
    Trump told Mexico's president-elect in a letter that a quick
renegotiation of NAFTA would bring more jobs for both countries,
but warned of a very different route otherwise.
    At 10:05 a.m. EDT (1405 GMT), the Canadian dollar          
traded 0.5 percent higher at C$1.3091 to the greenback, or 76.39
U.S. cents. The currency touched its strongest since July 11 at
     The price of oil, another major Canadian export, rose for a
second day after data showed U.S. crude inventories fell more
than expected. U.S. crude        prices were up 0.3 percent at
$68.69 a barrel.      
    Canadian government bond prices were lower across a flatter
yield curve, with the two-year            down 3.5 Canadian
cents to yield 2.021 percent and the 10-year             falling
5 Canadian cents to yield 2.231 percent.

 (Reporting by Fergal Smith; Editing by Jeffrey Benkoe)