Bonds News

CANADA FX DEBT-C$ posts 9-day high as jobs gain boosts case for rate hikes

 (Adds analyst quote, details throughout; updates prices)
    * Canadian dollar at C$1.2765, or 78.34 U.S. cents
    * Loonie touches its strongest since Oct. 25 at C$1.2716
    * Speculators cut bullish bets on loonie
    * Bond prices mixed across flatter yield curve

    By Fergal Smith
    TORONTO, Nov 3 (Reuters) - The Canadian dollar strengthened
to a nine-day high against its U.S. counterpart on Friday after
stronger-than-expected domestic jobs data supported the case for
further interest rate increases from the Bank of Canada next
    Canada's economy added 35,300 jobs in October, while wages
posted their biggest gain in 18 months. Analysts had expected
the economy to add 15,000 jobs.             
    "What we have seen in the labor data does support tighter
(monetary) policy at some point next year and perhaps sooner
than later," said Andrew Kelvin, senior rates strategist at TD
    The solid employment report contrasted with trade data which
showed exports falling for the fourth consecutive month.
    "People took the job report as being more of a factor for
the bank," said Mark Chandler, head of Canadian fixed income and
currency strategy at RBC Capital Markets.
    Perceived chances of another rate hike by the Bank of Canada
by March rose to 84 percent from 77 percent before the data, the
overnight index swaps market indicated.           
    The central bank hiked rates in July and September for the
first time in seven years, but has turned more dovish since
    Speculators have cut bullish bets on the loonie, data from
the U.S. Commodity Futures Trading Commission and Reuters
calculations showed. As of Oct. 31, Canadian dollar net long
positions had slipped to 57,839 contracts from 72,332 a week
    At 4 p.m. EDT (2000 GMT), the Canadian dollar          was
trading at C$1.2765 to the greenback, or 78.34 U.S. cents, up
0.3 percent.
    The currency's weakest level of the session was C$1.2835,
while it touched its strongest since Oct. 25 at C$1.2716. For
the week, it rose 0.4 percent.
    Adding to support for the loonie, U.S. crude prices touched
a two-year high after rig data suggested drilling in the United
States would throttle back.             
    Oil is one of Canada's major exports.
    The U.S. dollar        rose against a basket of major
currencies after the release of U.S. factory orders and services
sector data that beat estimates offset an underwhelming October
jobs report.             
    Canadian government bond prices were mixed across a flatter
curve, with the two-year            down 5.5 Canadian cents to
yield 1.44 percent and the 10-year             rising 2 Canadian
cents to yield 1.956 percent.
    The gap between Canada's 2-year yield and its U.S.
equivalent narrowed by 2.4 bps to a spread of -17.7 basis

 (Reporting by Fergal Smith; editing by Susan Thomas and Rosalba