CANADA FX DEBT-Canadian dollar weakens as oil prices fall

* Canadian dollar at C$1.3488 or 74.14 U.S. cents
    * Bond prices mixed across steeper maturity curve

    TORONTO, March 2 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Wednesday as crude oil prices
fell and after firmer than expected U.S. data supported bets for
Federal Reserve interest rate hikes this year.
    The currency reached a 12-week high on Tuesday at C$1.3387,
after stronger-than-expected growth in fourth quarter gross
domestic product reduced pressure on the Bank of Canada to cut
    The implied probability of a July rate cut has fallen to
just 25 percent from 33 percent from before the GDP data. It was
at 70 percent as recently as Feb. 19, as reflected in the
overnight index swaps market.
    Moreover, the March 22 federal budget presentation is
expected to include stimulus measures to support the economy.
    Oil prices retreated as an industry report showing a rise in
U.S. crude stockpiles to a new record countered support from
producer efforts to tackle a supply glut. 
    U.S. crude prices were down 1.63 percent to $33.84 a
    At 9:27 a.m. EST (1427 GMT), the Canadian dollar 
was trading at C$1.3488 to the greenback, or 74.14 U.S. cents,
weaker than Tuesday's official close of C$1.3414, or 74.55 U.S.
    The currency's strongest level of the session was C$1.3406,
while its weakest level was C$1.3493.
    Data released south of the border on Wednesday showed U.S.
private employers added more jobs than expected in February.
 It follows encouraging U.S. factory and
construction data on Tuesday that suggested the world's biggest
economy was regaining momentum.    
    Canadian government bond prices were mixed across the
maturity curve, with the two-year price flat to yield
0.531 percent and the benchmark 10-year falling 25
Canadian cents to yield 1.263 percent.
    The curve steepened further as longer-dated maturities
underperformed. The spread between the 2-year and 10-year yields
widened by 2.8 basis points to 73.2 basis points, its widest
since Feb. 5.
    The Bank of Canada will conduct a C$400 million 30-year real
return bond auction on behalf of the Government of Canada. The
bidding deadline is 12:00 p.m. EST (1700 GMT).     
    Canadian trade data for January is awaited on Friday.

 (Reporting by Fergal Smith Editing by W Simon)