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Daily Market Update

Bernanke is giving a speech this morning, saying that the Fed may extend the Wall St. lending access to 2009.  To clarify, commercial banks have always had access to the Fed's lending "window".  Meaning, they could bring suitable collateral to the Fed and borrow money against it.  Since the fall of Bear Stearns, the Fed has extended that privilege beyond commercial banks to include investment banks (ie Wall St.).  They have also broadly increased what is considered allowable collateral to back these loans.  Essentially, the Fed had decided to take "toxic debt" off the street and exchange it for cash.  This was a temporary measure as a lot of assets became unmarketable.


  As mentioned above, the rumours swirling Fannie Mae and Freddie Mac served to push out the credit spreads once again.  The Markit IG10 is wider once again, pushing up to 145.  Canadian credit was also weaker, particularly in the financials, but less so than south of the border.  6 year CIBC debt now trades around 140 bps over Canada bonds, well within its wides of 192 seen in April

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