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Daily Market Commentary

Expect slow trading, as the US bond market closes early today @ 1pm EDT, many south of the border have already checked out.

We won't have any data until existing home sales is released at 10 am, widely expected to disappoint again.  Remember existing homes is where 4/5 of the housing action is in the US.  New homes account for much less, and are subject to corporate price when the builders decide to get off inventory.

Bonds are moderately higher this morning after two days of sharp selloffs.  Despite weak retail sales in Canada yesterday, our market took its lead from the US and got creamed, two year yields rising above 3.00% making for a 25 bp, two day selloff.

Bell bonds saw some action yesterday, but the strips did not.  Desks around the street preferred to stay cautious on the name, bidding the bonds stronger while not offering very many at all.  Strips, however, did not participate.  We saw stronger indications, but zero cash flow debt still is too risky for most, with so much still up in the air.  We will keep the Blackblog updated with tidbits on the BCE debt.

Reuters reports that distressed debt issues are on the rise as more companies turn to the high yield markets to finance themselves.  The report mentions Six Flags, AbitibiBowater and RH Donnelley as examples of those that will have to issue junk to raise funds to pay interest on their existing debt as the economy slows, or possibly face bankruptcy.  These 3 companies asked bondholders to exchange existing debt for longer-dated new bonds to avoid running out of cash.

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