CANADA FX DEBT-C$ dips to new 12-year low; 10-year yield hits record low

* Canadian dollar at C$1.4453, or 69.19 U.S. cents
    * Currency hit a new 12-year low at $1.4547
    * Bond prices higher across the maturity curve
    * 10-year yield hit new record low at 1.154 percent

    TORONTO, Jan 15 (Reuters) - The Canadian dollar dropped to a
fresh 12-year low against its U.S. counterpart and Canada's
10-year yield hit a record low, pressured by a deeper dive in
crude oil prices and increased bets that the Bank of Canada will
cut rates next week.
    Early declines of about 2 percent on U.S. stock indexes
added to pressure on the risk-sensitive commodity currency,
while bond yields were driven lower as weaker-than-expected U.S.
retail sales data lessened the prospects of additional U.S.
Federal Reserve interest-rate hikes.
    "The market is thinking of additional cuts, oil keeps
getting punished and all these things contribute to the weaker
Canadian dollar," said Andrew Kelvin, senior rates strategist at
TD Securities.
    The implied probability of a domestic rate cut next week has
increased to 56 percent from just 22 percent after a speech last
week by Bank of Canada Governor Stephen Poloz. 
    Moreover, the market has fully discounted a rate cut by
April and it has implied a one-third chance of an additional
rate cut by the end of the year.    
    U.S. retail sales unexpectedly fell in December, adding to
signs that economic growth braked sharply in the fourth quarter.
    "It doesn't help Canada," said Kelvin. 
    Signs that the U.S. economy is not quite as strong as people
had previously thought "gives a little less hope for the
Canadian export sector," he added.
    U.S. crude prices were down 4.55 percent to $29.78 a
    At 9:34 a.m. EST (1434 GMT), the Canadian dollar 
was trading at C$1.4453 to the greenback, or 69.19 U.S. cents,
weaker than the Bank of Canada's official close Thursday of
C$1.4362, or 69.63 U.S. cents.
    The currency's strongest level of the session was C$1.4345,
while it hit its weakest since April 2003 at C$1.4547.
    Adding to headwinds for the currency, sales of existing
homes in Canada fell in December from November, a report from
the Canadian Real Estate Association showed. 
    Canadian government bond prices were higher across the
maturity curve, with the two-year price up 5.5
Canadian cents to yield 0.288 percent and the 10-year
 rising 52 Canadian cents to yield 1.175 percent. It
hit a record low at 1.154 percent.
    The curve flattened in sympathy with U.S. Treasuries, as the
spread between the 2-year and 10-year yields narrowed 2.9 basis
points to 88.7 basis points, indicating outperformance for
longer-dated maturities.
    The Canada-U.S. 10-year bond spread was 3.1 basis points
less negative at -83.5 basis points as Treasuries outperformed.

 (Reporting by Fergal Smith; Editing by Bernadette Baum)