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Daily Market Commentary

The running of the bond bulls keeps on going!  After a strong rally in the credit markets of both Canada and the US yesterday, reports that LBO financing has temporarily "closed for business" continues to fuel the global flight to quality (a Bear Stearns report recommends buying 2 year notes to all their clients).  Amidst stronger Q2 US GDP numbers, 10 year Treasury's broke through the 4.75% technical barrier this morning as investors continue to flee from the rout in global share prices.  Core PCE figures, which is the Fed's preferred inflation gauge, rose 1.4% last quarter (down from 2.4% in Q1).  Policy makers will be pleased with this (including Chairman Bernanke), who have publicly stated that a 1%-2% increase is their target area.  Implied Fed Future's are now predicting a 25 bps rate cut in December (in contrast to last week when March was the target time frame).




The Greenback continues to rally against the CAD this morning, reaching 1.0610 overnight.  The US-CAD 10 year spread continues to narrow, tightening to 20 basis points.


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