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Daily Market Commentary

Bonds are continuing lower ahead of the numbers this morning.  The bond market has been under some considerable selling pressure for two months now.  Technically, we are at an important point as the 10 year treasury has just crossed over its 200 day moving average.
Recently, the market has been more or less ignoring the data - the direction has been decided and its lower.  This is most likely in response to new thinking on the direction of Fed Funds.  The implied probability of Fed Funds are calling for 50 bps of hikes by the end of the year, with the first hike coming in September. 

The MarkIt IG 10 index, which I've mentioned a couple of times recently and will start referencing, moved in slightly, indicating out performance by the corporate markets over the governments.  That out performance seems to have stopped this morning, however.  Investors are being cautious with financial issues, in particular, after credit default swap spreads on Merrill and Lehman (among other banks) are heading wider. 

Breaking:  US GDP is out at 0.9% annualized for the quarter, as expected.  The more surprising number is the HUGE current account surplus in Canada for Q1 @ $5.6 billion.

Bonds are continuing lower and the CAD$ are higher on this news.

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