CANADA FX DEBT-C$ strengthens to fresh 7-week high as oil surges

* Canadian dollar at C$1.3114, or 76.25 U.S. cents
    * Loonie touches strongest since Oct. 19 at C$1.3112
    * Bond prices lower across a steeper yield curve
    * 10-year yield touches highest since July 2015.

    TORONTO, Dec 12 (Reuters) - The Canadian dollar strengthened
to a fresh seven-week high against its U.S. counterpart on
Monday and bond yields climbed as oil surged after the world's
top crude producers agreed to the first joint output cut since
    U.S. crude prices were up 4.49 percent at $53.81 a
barrel after the Organization of the Petroleum Exporting
Countries and some of its rivals reached a deal to jointly
reduce output to try to tackle global oversupply and boost
    Oil is one of Canada's major exports.
    At 9:49 a.m. EDT (1449 GMT), the Canadian dollar 
was trading at C$1.3114 to the greenback, or 76.25 U.S. cents,
stronger than Friday's close of C$1.3180, or 75.87 U.S. cents.
    The currency's weakest level of the session was C$1.3168,
while it touched its strongest since Oct. 19 at C$1.3112.
    The loonie rose 0.8 percent last week despite the Bank of
Canada pointing to "significant" slack in the Canadian economy
as it held interest rates steady. 
    The central bank's decision to leave rates unchanged set the
stage for a divergence in policy from that of the U.S. Federal
    Fed fund futures showed a 97 percent probability that the
Fed will lift rates by a quarter of a percentage point at the
end of its two-day policy meeting on Wednesday. 
    Speculators have cut bearish bets on the Canadian dollar,
according to Commodity Futures Trading Commission data on
Friday. Net short Canadian dollar positions dipped to 18,158 
contracts in the week ended Dec. 6 from 18,576 the prior week.
    Canadian government bond prices were lower across a steeper
yield curve in sympathy with U.S. Treasuries as higher oil
prices supported investors' expectations for increased
    The two-year price fell 4 Canadian cents to yield
0.763 percent and the benchmark 10-year declined 32
Canadian cents to yield 1.765 percent.
    The 10-year yield touched its highest intraday level since
July 2015 at 1.773 percent.

 (Reporting by Fergal Smith; Editing by Meredith Mazzilli)