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Market Commentary

 Interesting day yesterday, as almost all the data came out bond bearish, yet the market hit some support @ 4.80% (US 10 year treasury) and bounced hard off of it.  The bonds ended the day higher by 5 bps as oversold was the word of the day.


Bank of Montreal revised their interest rate forecast following BoC governor Dodge's monetary policy report.  They are now calling for NO CHANGES to the Canadian overnight rate in 2007, and rate hikes in 2008.  This is after Dodge was quite hawkish in his remarks.  Interestingly, the 1-5 year part of the yield curve is still inverted, making the 5yrs look very expensive compared to the 2 years.


The CAD$ is slightly stronger this morning, even though Oil is not.  It's not materially higher, but perhaps the thought of the rate gap between US and Canada narrowing are attracting some more funds to Canada.


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