CANADA FX DEBT-C$ strengthens to nearly 10-month high as oil rallies

* Canadian dollar at C$1.2549 or 79.69 U.S. cents
    * Bond prices higher across the maturity curve

    By Ethan Lou
    TORONTO, April 28 (Reuters) - The Canadian dollar hit nearly
a 10-month high on Thursday against its U.S. counterpart as oil
rallied and weaker-than-expected American economic growth
weighed on the greenback.
    Oil markets rose to new 2016 highs, with U.S. crude 
settling at $46.03 per barrel, up 70 cents, as a weaker U.S.
dollar had investors shrugging off record high U.S. crude
inventories and relentless pumping by major producers.
    "Canada is once again proving to be more stable and more
strong than markets had anticipated." said Adam Button, currency
analyst at ForexLive in Montreal
    The loonie's rise against its American counterpart comes as
the U.S. dollar suffered a deep daily loss against the
yen, after a lack of fresh stimulus from the Bank of Japan sent
the yen soaring and world equity markets into the red.
    U.S. gross domestic product increased at a 0.5 percent
annual rate, the weakest since the first quarter of 2014, the
Labor Department said in its advance estimate. 
    The Canadian dollar has rallied more than 17 percent from a
12-year low in January of C$1.4689, helped by
better-than-expected domestic economic activity, fiscal stimulus
and rebounding oil prices. Oil is a major Canadian export.
    The Canadian dollar ended at C$1.2549 to the
greenback, or 79.69 U.S. cents, stronger than Wednesday's close
of C$1.2619, or 79.25 U.S. cents.
    The currency's weakest level was C$1.2606, while it touched
its strongest since July 1 last year at C$1.2515.
    Canadian government bond prices were higher across the
maturity curve, with the two-year price up 1 Canadian
cent to yield 0.674 percent and the benchmark 10-year
 rising 20 Canadian cents to yield 1.479 percent.
    The Canada-U.S. two-year bond spread was 4.8 basis points
less negative at -11.6 basis points, its narrowest gap since
Nov. 23 last year, as Treasuries outperformed.

 (Reporting by Ethan Lou in Toronto; Editing by Toni Reinhold)