CANADA FX DEBT – Soaring bond yields spooked investors, capping Canadian dollar gains

(Adds analyst quotes and details throughout; updates prices)


The Canadian dollar appreciates 0.1% against the greenback


Trades in a range of 1.3641 to 1.3775


US oil price stands 2.3% higher


Canadian 10-year yield hits nearly 3-month high

By Fergal Smith

TORONTO, Sept 27 (Reuters) – The Canadian dollar edged higher against its U.S. counterpart on Tuesday as oil prices rose, but the move was limited as investors feared the continued rise in bond yields could tip the market. world economy in recession.

the loon traded up 0.1% at 1.3720 to the US dollar, or 72.89 US cents, after trading in a range of 1.3641-1.3775. On Monday, it touched its lowest intraday level since May 2020 at 1.3808.

“It’s impossible to find a bid for bonds,” said Adam Button, chief currency analyst at ForexLive. “The chances of a financial or economic crisis are increasing and this has a direct impact on the outlook for the Canadian economy.”

Canada is a major producer of commodities, including oil, so the loonie is particularly sensitive to global economic prospects.

“We’ve gone from pricing the possibility of a global recession to the likelihood of a global recession,” Button said.

The US 10-year yield, a major benchmark for borrowing costs around the world, hit a new 12-year high and Wall Street sank deeper into a bear market.

As higher borrowing costs dampen Canada’s oversized housing market, investors are betting the Bank of Canada will raise interest rates below the Federal Reserve, an outcome that could spell more trouble to the Canadian dollar.

Oil recovered some of its recent decline, supported by supply restrictions in the US Gulf of Mexico ahead of Hurricane Ian. U.S. crude oil futures settled up 2.3% to $78.50 a barrel.

Canadian government bond yields rose on a much steeper curve. The 10 years touched its highest level since June 29 at 3.361% before plunging to 3.297%, up 7 basis points on the day. (Reporting by Fergal Smith Editing by Alistair Bell) (([email protected]; +1 647 480 7446;)) Tags: CANADA FOREX/ (UPDATE 1)

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Robert D. Coleman