CANADA FX DEBT-C$ weakens, bonds rally on grim US jobs data

* C$ at C$0.9818 vs US$, or $1.0185

* U.S. payrolls flat in Aug, well below expectations

* Bonds push higher across curve; yields near August lows

TORONTO, Sept 2 (Reuters) - The Canadian dollar weakened on Thursday after the U.S. jobs report came in far weaker than expected, reigniting fears about a global growth slowdown and sending investors to safe-haven assets.

News that U.S. employers hired no new workers last month, against expectations for a 75,000 increase in payrolls also sent government bonds prices higher and pushed stock markets into a global slump. [MKTS/GLOB]

The U.S. dollar weakened against key currencies including the yen, Euro and Swiss franc.

But Canada’s dollar was even softer, weakening against all major currencies on concern about the country’s link to the U.S. economy. The United States is Canada’s largest trading partner.

“Overall it’s a weak U.S. dollar story,” said Camilla Sutton, chief currency strategist at Scotia Capital.

“The impact for the Canadian dollar is a little bit mixed up because we’re so closely tied to the U.S. economy. It likely means the Canadian dollar underperforms on the crosses, but all in all I think we’ll have a brief spike in risk aversion just because a weaker U.S. economy threatens the global economy.”

The Canadian dollar slid to a session low of C$0.9823 against the U.S. dollar, or $1.0180, immediately after the U.S. jobs report, before recovering slightly.

At 9:20 a.m. (1320 GMT) the Canadian dollar CAD=D4 was at C$0.9818 to the U.S. dollar, or $1.0185, down from Thursday's session close of C$0.9755 to the U.S. dollar, or $1.0251.

The U.S. Labor Department said nonfarm payrolls were unchanged in August, the weakest reading since September 2010, and nonfarm employment for June and July was revised to show 58,000 fewer jobs. [ID:nOAT004865]

The grim employment news will likely keep pressure on the U.S. Federal Reserve to provide more monetary stimulus to aid the economy.

“The weakness in the overall U.S. employment situation ... likely raises speculation that the FOMC will step in with another round of asset purchases later this fall,” Sutton said.

Canadian government bond prices pushed higher across the board, alongside U.S. Treasuries, with many investors anticipating further signs of economic weakness. [US/]

The two-year bond CA2YT=RR rose 9 Canadian cents to yield 0.95 percent, while the 10-year bond CA10YT=RR gained 63 Canadian cents to yield 2.32 percent.

Yields across the curve were near many of the multi-decade lows reached last month. (Editing by Jeffrey Hodgson)