CANADA FX DEBT-C$ dips after Yellen remarks, as oil rebound fades

* Canadian dollar at C$1.3893, or 71.98 U.S. cents
    * Bond prices lower across maturity curve

    TORONTO, Feb 10 (Reuters) - The Canadian dollar dipped
against its U.S. counterpart on Wednesday as a rebound in crude
oil prices faded and U.S. Federal Reserve Chair Janet Yellen
left the door open to further interest rate hikes.
    Yellen cited global risks in her prepared testimony to
Congress, but said she expects moderate growth that will allow
the U.S. central bank to pursue "gradual" adjustments to
monetary policy. 
    Oil reversed lower after posting its third-biggest daily
fall since 2008 on Tuesday. U.S. crude 
prices were down 0.29 percent to $27.86 a barrel.
    At 9:03 a.m. EST (1403 GMT), the Canadian dollar 
was trading at C$1.3893 to the greenback, or 71.98 U.S. cents,
weaker than the Bank of Canada's official close on Tuesday of
C$1.3879, or 72.05 U.S. cents.
    The currency's strongest level of the session was C$1.3820,
while its weakest was C$1.3921. 
    Canada's new Liberal government is set to unveil its first
budget in the week of March 21, two sources with knowledge of
the process said on Tuesday. The Liberals have pledged major new
spending aimed at boosting a flagging economy. 
    Canadian government bond prices were lower across the
maturity curve on Wednesday, with the two-year price
down 3.5 Canadian cents to yield 0.37 percent and the benchmark
10-year falling 7 Canadian cents to yield 1.055
    The 10-year yield hit a new record low of 1.008 percent on
Tuesday amid a flight to safety.    
    The yield curve flattened further as the front-end
underperformed. The spread between the 2-year and 10-year yields
narrowed by 0.9 basis point to 68.5 basis points, its tightest
since December 2012.
    The Canada-U.S. two-year bond spread was 2.1 basis points
more negative at -36.5 basis points, while the 10-year spread
was 1.7 basis points more negative at -69.6 basis points as
Treasuries underperformed.    

 (Reporting by Fergal Smith; Editing by Paul Simao)