CANADA FX DEBT-C$ hits 8-month low as Trump squeezes NAFTA partners

 (Adds dealer quotes, details; updates prices)
    * Canadian dollar at C$1.2988, or 76.99 U.S. cents
    * Loonie touches its weakest since July 5 at C$1.3002
    * Bond prices rise across much of the yield curve
    * 10-year yield touches lowest since Jan. 11 at 2.145

    By Fergal Smith
    TORONTO, March 5 (Reuters) - The Canadian dollar weakened to
an eight-month low against its U.S. counterpart on Monday after
U.S. President Donald Trump used proposed tariffs on steel and
aluminum as a bargaining chip in talks to revamp NAFTA.
    Trump is expected to finalize the tariffs later in the week.
He appeared to tie possible exemptions for Canada and Mexico to
a "new" North American Free Trade Agreement as well as other
    "It once again puts the risk of NAFTA and disruptions to
trade flows... right back at the forefront of people's
considerations," said Scott Lampard, head of global markets at
HSBC Bank Canada.
    Canada is the largest supplier of both steel and aluminum to
the United States. Its commodity-linked economy could be hurt if
NAFTA were to collapse or if more protectionist trade policies
were to lead to a slowdown in global trade.
    At 4 p.m. EST (2110 GMT), the Canadian dollar          was
trading 0.8 percent lower at C$1.2988 to the greenback, or 76.99
U.S. cents. The currency touched its weakest since July 5 at   
    Losses for the loonie came after data on Friday showed 
Canada's economy grew by an annualized 1.7 percent in the final
quarter of 2017, short of the Bank of Canada's forecast of 2.5
    The central bank has raised interest rates three times since
July but is expected to leave its benchmark interest rate on
hold at 1.25 percent in a policy announcement on Wednesday.
    HSBC's Lampard said he expects the Bank of Canada to wait
until the first quarter of next year before raising interest
rates again.          
    Domestic trade data for January is also due on Wednesday and
the February employment report is due on Friday.
    The price of oil, one of Canada's major exports, rose along
with the U.S. stock market on forecasts for robust oil demand
growth. U.S. crude oil futures        settled 2.2 percent higher
at $62.57 a barrel.                 
    Canadian government bond prices were higher across much of
the yield curve. The two-year            rose 4.5 Canadian cents
to yield 1.748 percent and the 10-year             gained 6
Canadian cents to yield 2.192 percent.
    The 10-year yield touched its lowest intraday since Jan. 11
at 2.145 percent, while the gap between it and its U.S.
equivalent widened by 3.1 basis points to a spread of -68.9
basis points, its widest since June 12.

 (Reporting by Fergal Smith
Editing by Nick Zieminski and Dan Grebler)