December 10, 2018 / 3:11 PM / a year ago

CANADA FX DEBT-C$ dips as oil prices decline, belly of curve inverts

    * Canadian dollar falls 0.1 percent against the greenback
    * Price of U.S. oil declines 2.3 percent
    * Canadian bond prices trade mixed across a flatter yield
curve
    * Spread between 2- and 5-year yields turns negative

    TORONTO, Dec 10 (Reuters) - The Canadian dollar edged lower
against its U.S. counterpart on Monday as oil prices declined
and the spread between Canada's two- and five-year yields turned
negative for the first time since September 2007.
    The five-year yield fell 0.6 basis points below the two-year
yield. A flat or inverted yield curve could reduce the incentive
for banks to lend and hinder investment in the multi-year
projects that tend to boost the speed at which an economy can
grow.                 
    The price of oil, one of Canada's major exports, fell in
line with further declines in global stock markets, erasing the
gains made last week when major producers agreed to cut their
crude output from January.             
    U.S. crude        prices were down 2.3 percent at $51.4 a
barrel.
    At 9:36 a.m. (1436 GMT), the Canadian dollar          was
trading 0.1 percent lower at 1.3342 to the greenback, or 74.95
U.S. cents. The currency, which touched on Thursday its weakest
in nearly 18 months at 1.3445, traded in a range of 1.3294 to
1.3362.
    The modest decline for the loonie came as the U.S. dollar
       rose against a basket of major currencies and as the
British pound        lost ground after British Prime Minister
Theresa May abruptly decided to pull a parliamentary vote on her
Brexit deal.             
    The loonie was paring some of its gains following stellar
jobs data on Friday. Canada added a record number of jobs in
November and the unemployment rate dipped to a new all-time low,
a performance that analysts said should help ease the Bank of
Canada's worries about a recent economic slowdown.             
    On Monday, the Canadian Mortgage and Housing Corporation
(CMHC) said that the seasonally adjusted annualized rate of
Canadian housing starts increased to 215,941 units from a
revised 206,753 units in October. Economists had expected starts
to fall to 198,000.             
    In separate data, the value of Canadian building permits
edged down by 0.2 percent in October from September, Statistics
Canada said.             
    Canadian government bond prices were mixed across a flatter
yield curve, with the two-year            price down 1.5
Canadian cents to yield 2.01 percent and the 10-year            
rising 10 Canadian cents to yield 2.063 percent.

 (Reporting by Fergal Smith
Editing by Bill Trott)
  
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