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Daily Market Commentary

Yields continue to rise this morning, the bear is well entrenched here and has many wondering what was so different about two weeks ago compare to now.


Chatter has started that the Fed has not only taken rate cuts off the table, but are now looking at hiking.  The Fed Funds implied probability (FFIP) shows a slight chance of a rate at the December meeting.  Even though the FFIP has historically been a poor predictor, it is a good indication of market sentiment.  US treasury 10 year yields are now north of all G7 comparables save the UK.


  5.25% so far has provided support here, and the market is looking somewhat oversold at these levels.  That said, given the steep selloff, a consolidation seems more likely than an out and out rally.  Canada bonds are following suit with treasuries, although not steepening nearly as much (see chart in Daily FI snapshot).  Does this leave us opening to more steepening?  It would make sense to see the Canadian curve normalizing a little more at this point, which makes me wary of longer duration despite the market being oversold.


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