INSIDE CANADA: CAD Touches Weakest Level Since 2009 Before Fed

CAD falls as much as 0.3% to 1.1187 USD, weakest level since July 2009, then gains 0.1% to 1.1137 before Federal Reserve policy announcement forecast to bring further reduction in monetary stimulus.

* CAD rises against 14 of 16 major counterparts * CAD up 0.6% vs AUD to 97.36 Canadian cents, first gain in three days * Confirmation of market expectations for pace of Fed’s stimulus reduction could push CAD to 1.12 per USD, TD strategist Shaun Osborne wrote in client note * U.S. central bank will reduce monthly bond purchases in stimulus program by $10b, according to economists surveyed by Bloomberg * CAD is biggest loser this month in basket of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Index, dropping 4.1 percent * CAD’s 14-day relative-strength index versus USD is below 30, level that indicates it may be set to reverse losses, for 12th day

GOVT DEBT: * Yield on 10-year government bond falls two bps to 2.40% * 1.5% security due in June 2023 gains 16 cents to 92.52 * Bank of Canada will auction C$3.3b ($3b) of two-year bonds tday; securities mature in May 2016 * Yield spread of provincial bonds over federal debt was unchanged at 68 bps yday, according to Bank of America Merrill Lynch Canadian Provincial & Municipal Index * Effective yield (GCAN10YR) on provincial debt fell to 2.84% from 2.86%

CORP DEBT: * Yield spread on corporate bonds over federal unchanged at 114 bps yday, according to Bank of America Merrill Lynch Canada Corporate Index * Effective yield on corporate debt rises to 2.85% from 2.87%

To contact the reporter on this story: Ari Altstedter in Toronto at aaltstedter@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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