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Daily Market Commentary

Canadian housing starts came out in line with expectations this morning at 221,000 for May.  This number, while apparently flat lining, is remaining remarkably strong.  Stronger starts everywhere except Ontario helped a rebound from April's numbers.

  Our housing market has remained firm despite the carnage in the US.  This is mostly attributable to our less aggressive lending tactics.   

The yield curve is flatter this morning as short bonds are giving up a lot of ground this morning.  The 2 year Canada is hovering just below 3% as the long end is up slightly on the day, holding in around 4.10%.

We would still argue that long bonds are far too expensive in this environment, especially when compared to the rest of the G8 yields.  At this point, until the inflation picture becomes a little clearer, there is little incentive to go way out the curve.  Keep duration shorter.

Don't expect much action before tomorrow Bank of Canada rate decision.  We are expecting a "25 and done" policy, but will be listening closely to the language.

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