CANADA FX DEBT-C$ strengthens as oil prices rebound

* Canadian dollar at C$1.2882, or 77.63 U.S. cents
    * Bond prices mixed across the maturity curve

    By Fergal Smith
    TORONTO, June 17 (Reuters) - The Canadian dollar
strengthened against its U.S. counterpart on Friday as a selloff
in oil and stocks ahead of Britain's EU membership vote next
week abated, although gains for the loonie stalled as domestic
data showed inflation slowed.
    Canada's annual inflation slowed in May to 1.5 percent from
a rate of 1.7 percent in April, with prices for gasoline and
food accounting for most of the change, Statistics Canada said.
The annual core inflation rate was 2.1 percent, down from 2.2
percent in April.
    Still, the core inflation rate remained above the Bank of
Canada's target of 2 percent, which suggests the central bank
should not be cutting interest rates, said Richard Gilhooly,
head of rates strategy at CIBC Capital Markets.
    "We think that's their inclination anyway because they don't
want to be getting into the negative rates scenario ...
obviously policy has shifted to fiscal away from monetary and
its going to remain that way," Gilhooly said.
    At 9:31 a.m. EDT (1331 GMT), the Canadian dollar 
was trading at C$1.2882 to the greenback, or 77.63 U.S. cents,
stronger than Thursday's close of C$1.2961, or 77.15 U.S. cents.
    The currency's strongest level of the session was C$1.2873,
while its weakest was C$1.2967.
    European shares and oil rose after a tumultuous week and as
campaigning for Britain's EU membership referendum next week was
suspended after the killing of a pro-"Remain" politician.
    U.S. crude prices were up 2.38 percent at $47.31 a
    Canadian government bond prices were mixed across the
maturity curve, with the two-year price up 0.5
Canadian cent to yield 0.509 percent and the benchmark 10-year
 falling 2 Canadian cents to yield 1.109 percent.
    Canada's 10-year yield moved 2.1 basis points further below
the equivalent maturity U.S. yield, leaving the spread at -47.7
basis points, as Treasuries underperformed on a reduced
safe-haven bid.

 (Reporting by Fergal Smith; Editing by Bernadette Baum)