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Daily Market Commentary

JP Morgan is now the second bank to beat the street's expectations in as many days, and credit markets are a little better on the news.  The chart below shows that JPM bonds are still trading close to their deepest discount relative to treasuries, but we'd expect this to improve modestly.  Late last week and early this week, when the financials were in panic mode, the selling of these bonds really accelerated. 

Fannie 2012 bonds are at 89 bps over treasuries as the market gets used to the idea that the government will step in, but only if necessary.  Compared to our more stable Canada Housing Trust (CMB) program, which has ALWAYS carried an explicit government guarantee, they still trade with excess credit.  Similar maturity CanMor's trade about 46bps over Canada bonds.

  It is interesting to note that the longer FNM bonds do not have excess spread.  The 2017 bonds are trading about 86 bps over Treasuries.  Since the yield curve is steep, there is extra outright yield, but none due to excess credit risk..

 US Housing Starts and Building Permits were both higher this morning, and too add to the econ positive (bond negative) news jobless claims dropped for the week.  Bonds are continuing yesterday's sharp selloff as equities rally off this news.

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