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Daily Market Commentary

After last week's turbulence, today's market action so far is tepid to say the least. US Treasurys are unchanged while Canadas have retreated fractionally. Canadian ten year bonds have narrowed to minus twenty five basis points to the Treasurys. In fact, Canadian yields have moved higher than Treasurys at 2 and 3 years and are equal at 5 years. Also, the yield curve is steep in the US, at 50 basis points from 2 to 10 years compared to just  20 bps here for the same term.

 

 Another shoe dropped this morning as National Bank decided to make whole the investors in its ABCP, announcing that it is buying back $ 2 billion of ABCP owned by its mutual funds and customers.

 

 The money market remains very tense, especially when company after company reveals the extent of their involvement in this now frozen section of the market. The run on Treasury Bills has left the street bereft of inventory until at least the 3 month maturity and this does not appear to be about to loosen unless the Bank of Canada unleashes a large cash management bill.

 

 For now, while market participants are applauding the Fed's cut of the Discount Rate, they are looking over their shoulders as surely there are more " accidents" to be announced.

 



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