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Daily Market Commentary

Canadian CPI yesterday, and retail sales this morning have left almost nothing to chance.  There will almost certainly be no rate cuts in Canada in the next year, according to the markets.  FX traders voted with their buy buttons yesterday and send the Loonie to a massive one day gain, which continues this morning on the back of the leading indicators number.  BAX futures have now virtually eliminated the probability of a rate cut in the next 12 months.

 

The bond market is continuing to churn in a tight range as we are witnessing renewed rate expectations, and most importantly, narrowing of the CAN-US yield spread (see chart in Daily FI snapshot).  This trade is down to 48 bps in the ten year area, from 60 bps (when Hank first mentioned in Monthly Fixed Income recap).  With bullish econ news out of Canada and relatively bearish news out of the US, watch for this spread to continue to narrow.

 

 

Almost forgot - Fed today at 2:15 pm.  There won't be a change, Fed should be watching employment closely.

 



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