CANADA FX DEBT-C$ weaker as Fed officials talk hikes

(Adds comment, updates prices to settlement)
    * Canadian dollar ends at C$1.2903, or 77.50 U.S. cents
    * Bond prices mixed across the maturity curve

    By Alastair Sharp
    TORONTO, May 17 (Reuters) - The Canadian dollar ended
slightly weaker against its U.S. counterpart on Tuesday, despite
higher oil prices, as traders had little appetite for big
positions as U.S. central bankers talk up the chance of a rate
    The loonie, as Canada's currency is colloquially known, has
in recent sessions traded mostly in a C$1.28-C$1.30 range after
recovering from almost C$1.47 to the greenback in January to
under C$1.25 in early May.
    That appreciation came as bets on U.S. Federal Reserve
interest rate hikes withered and global oil prices climbed from
a multi-year nadir.
    "The question is 'Which is going to falter first - the rate
spread argument or the oil story?" said Don Mikolich, executive
director, foreign exchange sales at CIBC Capital Markets. 
    He said U.S. and Canadian inflation data due later in the
week could provide impetus.
    "Some of the numbers we're seeing for Q2 in Canada are not
shaping up particularly well so far," he said.
    A Fed policymaker said on Tuesday he will push for a hike in
June or July and two others still see up to three rate increases
this year. U.S. consumer prices jumped by the most in more than
three years in April, leaving open the possibility that U.S.
monetary policy boosts the value of the U.S. dollar.
    The Canadian dollar settled at C$1.2903 to the
greenback, or 77.50 U.S. cents, slightly weaker than Monday's
close of C$1.2896, or 77.54 U.S. cents.
    A wildfire threatened some oil sand facilities in Alberta,
while domestic manufacturing data was not as weak than feared.
    Canadian energy producers were hit with fresh disruptions
after a massive wildfire around the oil sands hub of Fort
McMurray, Alberta, shifted north, forcing the evacuation of
about 4,000 people from work camps. 
    Canadian factory sales fell 0.9 percent in March from
February, data showed. The decline was smaller than forecast,
however, and sales rose 0.1 percent in constant-dollar terms.
    Canadian government bond prices were mixed across the
maturity curve, with the two-year down 3.5 Canadian
cents to yield 0.583 percent and the benchmark 10-year
 off 3 Canadian cents to yield 1.317 percent while
20-year and 30-year bond prices fell.
    The Canada-U.S. two-year bond spread was 2.6 basis points
more negative at -24.8 basis points, its largest gap since March
29, while the 10-year spread was 1.2 basis points more negative
at -45.5 basis points as Canadian government bonds outperformed.

 (Additional reporting by Fergal Smith; Editing by Lisa Von Ahn
and Dan Grebler)