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Today's commentary

There continues to be steady improvement in capital markets.Overnight, the 3 month Libor fell another 15 basis points and Australia cut its key rates by 75 basis points, all of this ahead of the ECB and BOE rate cuts.

 More importantly, there are signs of definite improvement in secondary and primary bond markets. I have said for some time that provincial bonds and crown corps such as CMBs were ridiculously cheap and finally, investors are dipping their toes into these sectors and spreads are tightening.
Further, there has been some new issue activity in the corporate bond market in the US with some tightening in post issue trading.
In Canada, the treasury bill market is returning to normal and the spread to BAs is narrowing.
 Thus, it appears that the crisis is over, and some of the panic reduced but there is a long way to go yet.
 There seems to be little hope of the bond market mounting any decent rally here, with the yield curve likely to steepen further. Thus, investors should focus on some of the still very cheap credits out there.

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