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Market Commentary

Bonds are grinding higher again this morning as Durable goods orders fell off a cliff this morning.  Combine this with the previous Fast Desk commentary on the deflating Chinese stock market overnight, and it could spell some ugliness in the economy in the coming months.  Oil is reflecting this sentiment by selling off by about a point.  The Fed Funds futures (shown in yesterday's FI snapshot) have now priced in a Fed rate cut by the end of the year, even though the Canadian BAX futures have not.  Perhaps resilience (and lower rates to start with) in the Canadian economy will continue.  While this all points towards lower yields for bonds, we should also note that this action favours US$ bonds, and we would expect them to outperform the Canadas in this environment.

   The CAD$ remains steady in the 1.1600 area, even as Gold is taking on the teeth (lowering inflation expectations perhaps?).  The US$ and CAD$ are moving lower in tandem against the world majors.



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