CANADA FX DEBT-C$ closes up, budget reaction muted

* Canada promises tough measures to cut deficits

* C$ closes at 97.03 U.S. cents, dips after budget

* Bonds little changed, await U.S. nonfarm payrolls

* Government plans C$95 bln of gross bond issuance
(Adds details)

By Ka Yan Ng

TORONTO, March 4 (Reuters) - The Canadian dollar closed
higher against the U.S. dollar but off its session high on
Thursday, showing little reaction to the release of the federal
government's 2010-11 budget.

Closing the stimulus tap and cutting spending sharply after
the economy recovers will rein in Canada's record budget
deficit, the government said on Thursday. [ID:nCFB000108]

But with some of the details leaked ahead of the
publication, there was a muted reaction from government bonds
and the Canadian dollar.

"The market is not in the least surprised," said Eric Lascelles,
chief economics and rates strategist at TD Securities.

"There's nothing really of interest to the broader market.
That's not such a bad thing these days. These days you don't
want to risk the ire of the financial markets, so to have a
budget that elicits little reaction is probably as much as you
can ask for."

The Canadian dollar closed higher for a fifth straight
session at C$1.0306 to the U.S. dollar, or 97.03 U.S. cents,
compared with C$1.0320 to the U.S. dollar, or 96.90 U.S. cents,
at Wednesday's close.

It slipped to C$1.0315 to the U.S. dollar, or 96.95 U.S.
cents, after the budget was published although Lascelles said
the fall back may be attributed to caution ahead of release of
U.S. nonfarm payrolls data for February on Friday.
[ID:nN02150933]

Earlier, data showed Canadian building permits and
purchasing data came in weaker than expected, while consumer
confidence edged higher. But the Canadian dollar was able to
fight through the disappointing data. [ID:nN04146256]

"It has been on balance a good day for the Canadian dollar,
overcoming a weak Ivey (purchasing managers index) number,
overcoming broadly-based U.S. dollar strength...and (despite)
commodities that have by and large have been lower," said Jack
Spitz, managing director of foreign exchange at National Bank
Financial.

"With the U.S. dollar being bid across the board, the
Canadian dollar's muted performance does reflect some strength
when compared to other major currencies."

BONDS LITTLE CHANGED, EYE ISSUANCE

Canadian bonds were little changed across the curve with a
bias lower. TD's Lascelles said the government's plan in
2010-2011 to issue about C$95 billion in domestic marketable
bonds was higher than he had expected. [ID:nCFB000110]

"Conceivably there could be a slight bond bearish influence
from this budget, but ultimately there is also the effect that
anytime Canada makes any fiscal announcement it looks good on
the international stage and it attracts investors. That story
will probably temper the reaction."

The two-year Canadian government bond CA2YT=RR was off 1
Canadian cent at C$100.06 to yield 1.469 percent, while the
10-year bond CA10YT=RR was down 2 Canadian cents at C$102.60
to yield 3.419 percent.
(Editing by Peter Galloway)