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Daily Market Commentary

Yesterday's action in the bond world was very slow.  We were expecting some more action out of the Bell bonds, but saw very little.  Prices were marked down as expected. 

We are closely watching the Bell 6.25% 4/12/2012, which are currently trading about 97.00 on the offered side.  As a four year "income earner", the yield of 7.16% is attractive, and we would not be significantly worried about Bell's ability to pay during that time. 

Yesterday's massive rally in CAD$ was little noticed or felt, as we kept pace with greenbacks (our main counterparty).  However, we were up a full Euro penny, and 1.2 pence and gold dropped significantly.  We are giving up some of those gains this morning, but they mostly stand.

 As the Fed decision looms tomorrow, it is worth noting the market's expectations of rates according to Fed Funds futures.  While we won't see any movement tomorrow, all of Bernanke's hawkish talk has led the curve to slope upwards considerably since a month ago.

While 2.00% is very low, we would caution those that think swift rate hikes are coming.  This economy appears to be very weak (we will learn a little more from the numbers this week).  The Fed does not NEED to move.  We could see an environment here that justifies flat overnight rates, and the bond market will take care of the inflation expectations (as it has with a quickly steepening yield curve). 



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