CANADA FX DEBT-C$ slips on Spain woes, awaits BoC

* C$ at C$1.0407 vs US$, or 96.09 U.S. cents
    * C$ trading cautious ahead of BoC rate decision
    * Bond prices mixed

    By Jon Cook	
    TORONTO, June 5 (Reuters) - The Canadian dollar was slightly
weaker on Tuesday on growing concerns about whether Spain can
restore health to its banks and as investors remained cautious
ahead of the Bank of Canada's rate announcement.	
    Spain's problems, and the threat they hold for the rest of
the world, will be discussed in a teleconference by finance
ministers and central bankers from the United States, Canada,
Japan, Britain, Germany, France and Italy (the G7) later on
    "The Spanish bond auctions and the bank issues there are
certainly wreaking havoc on markets," said Blake Jespersen,
managing director, foreign exchange sales, BMO Capital Markets.	
    The G7 talks had boosted the euro earlier but it fell after
Spain's Treasury Minister Cristobal Montoro highlighted the
funding problems facing Spain as investors fretted the country
may have to seek external aid. 	
    The Canadian dollar, which is sensitive to global growth
issues, firmed overnight to C$1.0361 versus the U.S. currency,
or 96.51 U.S. cents.	
    However, trading of the currency remained cautious ahead of
the Bank of Canada's interest rate announcement at 9 a.m. (1300
GMT) on Tuesday.	
    Canada's central bank is widely expected to keep interest
rates on hold given fears about the euro zone's debt woes and
signs of weaker global growth. But traders were trying to gauge
how much the central bank will tone down the hawkish language it
used in April. 	
    "The market's expecting the tone to be somewhat more
dovish," said Jespersen. "There's a lot of speculation around
(Bank of Canada Governor Mark) Carney's announcement this
morning so the tone could change dramatically after today."	
    At 7:57 a.m. (1157 GMT), the Canadian currency was
at C$1.0407 against the U.S. dollar, or 96.09 U.S. cents, down
slightly from Monday's close at C$1.0397, versus the greenback,
or 96.18 U.S. cents.	
    Jespersen said there remained the chance that Carney's tone
stays hawkish, which would boost the Canadian dollar.	
    "There is a chance this backs up to C$1.0350 if Carney does
in fact continue his rhetoric that the domestic economy warrants
a rate hike not a cut."	
    Canadian bond markets were mixed. Canada's four-year bond
 rose 3 Canadian cents to yield 1.086 percent, while
the benchmark 10-year bond fell 4 cents to yield
1.681 percent.