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The Big Thaw begins

This week we are finally seeing some tentative signs of easing credit conditions. The TEd spread has shown 5 consecutive days of improvement but remains at extremely elevated levels(400+), there has been some selling of government bonds to buy corporate credit and there have been a couple of new corporate bond issues.

CMHC has purchased the first $5 billion of mortgages from the banks at 4.24% and in a seemingly unrelated event, the Government issued 5 year bonds at 3.24% for a tidy gain of 100 basis points. Nice trading!

Bond prices are getting a bit of a bid after this morning's very week US Housing starts and permits. The silver lining in this is that weaker permits mean that it will take less time to clear out the overhang of unsold new houses.

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