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Daily Market Commentary

Divergence between US and Canadian numbers continues to have me confused as to why US yields are so much higher than ours.  Canadian CPI this morning surprised to the upside, the core posting at 2.5% rise compare to last month's 2.3%.  Headline is slightly lower at 2.2%.  This doesn't bode well for the Canadian bonds compared to Treasuries.  The Ten year yield spread has dropped to 43 bps, acting much more slowly than anticipated.  It should continue to narrow from here as our CPI appears to be trending upwards while the US keeps edging lower.

 

  Yesterday, bonds had yet another lacklustre session despite more soft US housing numbers.  Industrial production was very strong in the US, which perpetuates the story that housing and consumer sectors are somewhat weak, but the corporate sector is rock solid.

 

This morning's weekly jobless claims were light, and Canada's Wholesale Sales were strong.  This is adding fuel to the selling fire.

 

Bonds are now down materially across the continent.

 

  The CAD$ is once again stronger across the world, as is the Greenback.  The latter seems to have gotten a bid after a pretty significant selloff month to date, but not against the CAD$... traders continue to love it and will as long as we keep posting data like this morning's CPI number.

 



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