CANADA FX DEBT-C$ edges higher as oil prices stabilize

    * Canadian dollar at C$1.3456, or 74.32 U.S. cents
    * Bond prices higher across a flatter yield curve
    * Gap between 2 and 10 year yields hits narrowest in 6

    TORONTO, May 26 (Reuters) - The Canadian dollar edged higher
against its U.S. counterpart on Friday as prices of oil, one of
Canada's major exports, stabilized after a sharp drop the day
    U.S. crude        prices were up 0.22 percent at $49.01 a
    Oil prices had plunged on Thursday following an Organization
of the Petroleum Exporting Countries-led decision to extend
current production curbs that investors gauged did not go far
enough to reduce a global supply glut.      
    Gains for the loonie came even as the U.S. dollar       
climbed against a basket of major currencies. Data showed that
U.S. economic growth slowed less sharply in the first quarter
than initially thought.             
    At 9:27 a.m. ET (1327 GMT), the Canadian dollar          was
trading at C$1.3456 to the greenback, or 74.32 U.S. cents, up
0.2 percent.
    The currency traded in a range of C$1.3433 to C$1.3497.
    On Thursday, the loonie touched its strongest intraday level
in five weeks at C$1.3388 after the Bank of Canada on Wednesday
sketched a rosier economic view than investors had expected in
its statement announcing no change in its 0.5 percent benchmark
interest rate.
     Canadian government bond prices were higher across a
flatter yield curve, with the two-year            up 1.5
Canadian cents to yield 0.711 percent and the 10-year
            rising 23 Canadian cents to yield 1.437 percent.
    The gap between the 2-year and 10-year yields narrowed by
1.8 basis points to a spread of 72.6 basis points, its narrowest
since Nov. 8. Shorter-dated Canadian bonds have increasingly
underperformed longer-dated maturities since Wednesday's rate
decision by the Bank of Canada.

 (Reporting by Fergal Smith; Editing by W Simon)