*

Loonie trades in a range of 1.3715 to 1.3754

*

Defense spending set to rise to 5% of GDP

*

Price of oil increases 1.5%

*

10-year yield rises 4.8 basis points

By Fergal Smith

TORONTO, June 25 (Reuters) - The Canadian currency was

barely changed against its U.S. counterpart on Wednesday and

bond yields climbed as investors weighed Canada's commitment to

raise military spending and after recent domestic data did

little to advance prospects of an interest-rate cut next month.

The loonie was trading nearly unchanged at 1.3730 per

U.S. dollar, or 72.83 U.S. cents, after trading in a range of

1.3715 to 1.3754.

"I think we stay in a range for a while," said Aaron Hurd, a

senior portfolio manager in the currency group at State Street

Global Advisors. "It looks like the Canadian economy, the

monetary policy outlook is fairly stable."

Investors see a roughly two-in-three chance the Bank of Canada

leaves its benchmark interest rate on hold at 2.75% at the next

policy decision on July 30 after data on Tuesday showed

underlying inflation eased only somewhat in May.

Canada will join NATO's new defense investment pledge and invest

5% of its gross domestic product in defense spending by 2035,

Canadians Prime Minister Mark Carney said.

"The details are extremely important. If it is spent in

growing a domestic defense production capability, it will have a

much greater positive impact on long-run Canadian growth

compared to simply expanding the size of the military and buying

imported weapons and supplies," Hurd said.

Debt issuance could rise to pay for the extra spending, say

analysts. The Canadian 10-year yield rose 4.8 basis points to

3.322%, while the gap between it and the equivalent U.S. rate

narrowed by nearly 4 basis points to 98 basis points in favor of

the U.S. note.

The price of oil, one of Canada's major exports, clawed back

some of this week's declines as investors assessed the stability

of a ceasefire between Iran and Israel. U.S. crude oil futures

were trading 1.5% higher at $65.32 a barrel.