* Canadian dollar weakens 0.3 percent against the greenback * Canada's trade deficit narrows in January to C$4.25 billion * Canadian bond prices rise across the yield curve * Canada 10-year yield extends fall below yield on 3-month T-bill TORONTO, March 27 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Wednesday as bond yields hit new lows and data showed improvement in Canada's trade deficit that was less than expected. Canada's trade deficit narrowed in January to C$4.25 billion, as exports grew at a faster rate than imports, Statistics Canada said. Analysts had forecast a deficit of C$3.50 billion. Canada's 10-year yield fell 3 basis points further below the yield on the 3-month T-bill to -11.4 basis points. An inverted curve is seen by some investors as a leading indicator of recession. At 8:57 a.m. (1257 GMT), the Canadian dollar was trading 0.3 percent lower at 1.3420 to the greenback, or 74.52 U.S. cents. The currency, which touched on Monday a two-week low at 1.3445, traded in a range of 1.3377 to 1.3429. Separate data from Statistics Canada showed that non-farm payroll employees rose by 71,200 in January from December. A previously released monthly survey from Statistics Canada, the Labour Force Survey, has also showed strong job gains at the start of the year. Canada's gross domestic product data for January is due on Friday. The price of oil, one of Canada's major exports, seesawed as further disruptions to Venezuela's crude exports were offset by a report that U.S. inventories rose last week. U.S. crude prices were up 0.1 percent at $60.02 a barrel. Canadian government bond prices were higher across the yield curve in sympathy with U.S. Treasuries. The two-year rose 6 Canadian cents to yield 1.475 percent and the 10-year was up 26 Canadian cents to yield 1.546 percent. The 10-year yield touched its lowest intraday since June 2017 at 1.528 percent. (Reporting by Fergal Smith Editing by Susan Thomas)
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