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Daily Market Commentary

Yesterday's Bank announcement was the most hawkish we've seen for some time.  Canada bonds, which were pricing in the hawkish tone of Governor Dodge before the release, obviously hadn't priced in enough.  We saw some more selling pushing the Canada ten year to 4.50%.  Higher rates, of course, make investments look better to foreigners and the CAD$ rocketed higher as Dodge all but said he would start hiking rates at the next meeting.  Take a look at the BAX futures chart in the Daily FI snapshot to see how overnight rate expectations have been adjusted upwards.

 

This morning, MBA mortgage apps and ADP employment numbers have put a bit of a bearish spin on things, reminding us that the US economy looks to be significantly weaker than ours.

 

  The market is largely ignoring an inflationary print on Raw materials prices in Canada, although that's something we should file in the back of our minds.  Industrial product prices eased month over month, providing a little offset to the raw materials.

 

Once again, we are underperforming the Treasury market, although both are ticking slightly higher.  The CAN-US yield spread continues to narrow...

 



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