C$ dips, bond yields climb as Ottawa adds to deficit spending

* Canadian dollar weakens 0.2% against the greenback

* Loonie touches its strongest level since March 19 at 1.2471

* Canada forecasts a budget deficit of C$154.7 billion in 2021-22

* Canada's 30-year yield touches a one-month high at 2.071%

By Fergal Smith

TORONTO, April 19 (Reuters) - The Canadian dollar weakened on Monday against its U.S. counterpart, pulling back from an earlier one-month high, and bond yields rose as Canada's government lined up billions in new spending and said it would issue more long-term debt.

The loonie CAD= weakened 0.2% to 1.2532 to the greenback, or 79.80 U.S. cents, having touched its strongest intraday level since March 19 at 1.2471.

Canada's budget deficit is forecast to hit C$154.7 billion in the fiscal year ending next March, as Ottawa spends heavily to counter a third wave of COVID-19 infections and plans to bolster the economic recovery, the finance department said.

The share of bond issuance with a maturity of 10 years or greater is set to rise to 42% in the fiscal year ending next March from 29% the prior year. It was 15% before the crisis.

Investors were also looking ahead to a Bank of Canada interest rate decision on Wednesday. Analysts expect the central bank to announce it is cutting bond purchases from the current pace of C$4 billion per week.

The price of oil, one of Canada's major exports, was supported by a weaker U.S. dollar but gains were capped by concerns about the impact on demand from rising coronavirus cases in India. U.S. crude CLc1 prices settled 0.4% higher at $63.38 a barrel.

Canadian government bond yields were higher across a steeper curve. The 30-year CA10YT=RR touched its highest since March 19 at 2.071% before dipping to 2.062%, up 7.7 basis points on the day.
Reporting by Fergal Smith Editing by Chizu Nomiyama and Grant McCool

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

We are using cookies to give you the best experience on our website. Read more or change your cookie settings.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.