CANADA FX DEBT-C$ edges lower ahead of Fed decision
* Canadian dollar at C$1.3726, or 72.85 U.S. cents * Bond prices slightly higher across the yield curve * 2-year spread vs Treasuries touches its widest in 10 years TORONTO, May 3 The Canadian dollar weakened slightly against its U.S. counterpart on Wednesday, maintaining its recent defensive bias as investors braced for an interest rate decision from the Federal Reserve. The Fed is expected to hold interest rates steady as it pauses to parse more economic data, but it may hint it is on track for an increase in June. In contrast, the funding crisis at mortgage lender Home Capital may spark a welcome cooling in Canada's housing market and take pressure off the Bank of Canada to raise interest rates. Toronto home prices and new listings surged in April from a year earlier while sales fell, the Toronto Real Estate Board said, suggesting the market may be starting to rebalance after new housing rules were put it place amid fears of a bubble in Canada's largest city. At 9:15 a.m. ET (1315 GMT), the Canadian dollar was trading at C$1.3726 to the greenback, or 72.85 U.S. cents, down 0.1 percent. The currency traded in a range of C$1.3704 to C$1.3740. On Tuesday it had slumped to a fresh 14-month low at C$1.3758. U.S. tariffs on Canadian softwood lumber, a more uncertain outlook for the North American Free Trade Agreement and lower oil prices have weighed recently on the loonie. But prices of oil, one of Canada's major exports, rebounded from near 2017 lows after preliminary data showed a much larger-than-expected fall in U.S. crude stocks, reviving bullish sentiment about easing oversupply. U.S. crude prices were up 0.27 percent at $47.79 a barrel. Canadian government bond prices were slightly higher across the yield curve, with the two-year up 1 Canadian cent to yield 0.674 percent and the 10-year rising 5 Canadian cents to yield 1.51 percent. The 2-year yield fell 2.4 basis points further below its U.S. equivalent to a spread of -60.7 basis points, its widest since April 2007. Canada's trade report for March is due on Thursday, and the April employment report is due on Friday. (Reporting by Fergal Smith; Editing by Nick Zieminski)