* Currency fell to 4-year low below 70 US cents overnight
* Bond prices slide as investors flock back to equities
By Frank Pingue
TORONTO, Oct 28 (Reuters) - The Canadian dollar was higher versus the U.S. dollar on Tuesday in choppy trade that saw the currency move back from its lowest level in more than four years as a bout of short-covering kicked in.
Bond prices, with no Canadian data to consider, were down across the curve alongside the bigger U.S. Treasury market as a slew of bargain-hunting gave a jolt to global stock markets and left little interest in government debt.
At 9:40 a.m. (1440 GMT), the Canadian unit was at C$1.2864 to the U.S. dollar, or 77.74 U.S. cents, up from C$1.2889 to the U.S. dollar, or 77.58 U.S. cents, at Monday’s close.
That erased a steep overnight fall in the currency, which dropped to C$1.3019 to the U.S. dollar, or 76.81 U.S. cents, its lowest level since September 2004.
“People were lined up one way, the markets went against them and they basically had to jump on it,” said David Watt, senior currency strategist at RBC Capital Markets.
“And where we are now is probably more reasonable given what’s going on with other assets that we’ve been lumped in with for the past couple of weeks.”
The bounce in the Canadian dollar was also aided by a rally in global stock markets, higher prices for oil, a key Canadian export, and a slightly improved overall market sentiment.
But Watt suggested that the overnight low for the Canadian dollar below 77 U.S. cents could be a sign of things to come if signs of slowing global growth persist and if oil prices fall closer to the $60-a-barrel level.
With no Canadian economic data due until later in the week, the currency’s direction until then will likely be dictated by overall market sentiment.
The Canadian industrial product price index and the raw materials price index for September are due out on Thursday, followed by Friday’s gross domestic product report for August.
Canadian bond prices were all stuck lower after a global equities rally lessened the appeal of secure government debt.
The Toronto Stock Exchange’s main index shot 402 points, or 4.7 percent, higher at the open following a steep slide the previous session. The Dow Jones industrial average rose 140 points, or 1.7 percent, at the open.
The Canadian overnight Libor rate LIBOR01 was 2.2750 percent, up from 2.2500 percent on Monday.
Monday’s CORRA rate CORRA= was 2.2512 percent, down from 2.2609 percent on Friday. The Bank of Canada publishes the previous day’s rate at around 9 a.m. daily.
The two-year bond was down 7 Canadian cents at C$101.32 to yield 2.100 percent. The 10-year bond dropped 54 Canadian cents to C$104.58 to yield 3.678 percent.
The yield spread between the two-year and the 10-year bond moved to 160 basis points from 164 at the previous close.
The 30-year bond dipped 98 Canadian cents to C$113.67 to yield 4.176 percent. In the United States, the 30-year Treasury yielded 4.136 percent. (Editing by Peter Galloway)