December 10, 2018 / 9:12 PM / 5 months ago

CANADA FX DEBT-C$ weakens as investor sentiment ebbs on Brexit vote delay

 (Adds dealer quotes and details throughout; updates prices)
    * Canadian dollar falls 0.5 percent against the greenback
    * Price of U.S. oil declines 3.1 percent
    * Canadian bond prices trade mixed across flatter yield
curve
    * Spread between 2- and 5-year yields turns negative
    * Canada-U.S. 10-year spread widens by 2.5 basis points

    By Fergal Smith
    TORONTO, Dec 10 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Monday, as the delaying of a key
Brexit vote weighed on risk appetite and the spread between
Canada's two- and five-year yields turned negative for the first
time since September 2007.
    British Prime Minister Theresa May postponed a parliamentary
vote on her Brexit deal to seek more concessions, but the
European Union refused to renegotiate and lawmakers doubted her
chances of winning big changes.              
    "Had the UK not had the push-off on the vote, we think
USD-CAD would be back below 1.33," said Andrew Sierocinski,
foreign exchange analyst at Klarity FX. "It's just the risk-off
sentiment in the market that's kicking the loonie back lower
here."
    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 oil futures        settled 3.1 percent lower at
$51.00 a barrel.
    Canada's 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.             
    At 3:35 p.m. (2035 GMT), the Canadian dollar          was
trading 0.5 percent lower at 1.3400 to the greenback, or 74.63
U.S. cents.
    On Thursday, the currency touched its weakest level in
nearly 18 months at 1.3445 after the Bank of Canada suggested
the pace of future interest rate hikes could be more gradual.
            
    Still, data on Friday showed that 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.             
    The Canadian Mortgage and Housing Corporation (CMHC) said on
Monday 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.             
    Canadian government bond prices were mixed across a flatter
yield curve. The 10-year             climbed 19 Canadian cents
to yield 2.052 percent
    The gap between the 10-year yield and its U.S. equivalent
widened by 2.5 basis points to a spread of nearly 80 basis
points in favor of the U.S. bond.

 (Reporting by Fergal Smith; Editing by Bill Trott and Peter
Cooney)
  
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