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Another Day

It will be another roller coaster day. Bond prices are sharply higher, particularly in Canada. Our market was so oversold as per the charts that a rebound in bond prices was inevitable.

The fed has doubled its Term Auction Facility to $ 900 billion; as I have said, it will continue to throw money at the financial system until it sticks. The Fed will lower the Fed Funds Rate and i do not believe it will wait until October 29. It is unlikely that there will be a coordinated global rate cut so if that happens, it is another good sign.

It was interesting  that BNS was able to issue a fixed/floater with a fixed coupon of 6% for 5 years, 300 basis points over Canadas. This spread would have been 50 bps in June of 2007. This issue was heavily oversubscribed so there is money for well priced good quality issues. The bad news, and this is underscored in the Globe today, is that mortgage costs will rise in step with the increase in banks'borrowing costs.

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