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

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