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Daily Market Commentary

T-Bond traders are back.  Market volumes are coming back and we have some real data to lead us this morning.  Canadian CPI came out, as expected, and while the GoC's traded off on the release, they are back to unchanged.  Market was looking for a slight surprise to the downside.  Canadian leading indicators also ticked higher, although last month's number was revised lower.  This has amounted to more or less a wash in the Canadian market.  Treasuries are also trading slightly lower, but there isn't any data until we see the US CPI tomorrow.  This will be closely watched after last week's PPI came in so light.



An interesting statistic to note about bond market volatility: The average daily change on Treasury yields has fallen to 2.5 basis points (20 cents on a ten year) from 4.9 bps in 2001.  It seems with the Fed being more transparent and overtly targeting inflation (and deflation), the bond market has a much better read on the future level of interest rates.  This is reflected in the narrow trading range we've seen on bonds over the last several years.  The implications of this stat (assuming the trend continues), is that one must be better at timing the cycles than ever, or be content clipping their coupons in a buy and hold strategy.


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