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Daily Market Commentary

Fairly quiet day yesterday, bonds drifted higher along with the equities as the disconnect continues.  Today we are giving up some of those gains, but trading volumes are light as there is no data to speak of.  Corporate issuance continues, yesterday the 407 brought a new deal to market, and the appears the Royal Bank may not be done after their $3 billion issuance last Friday; they still have a shelf prospectus lying around for another $4 bill.  Combined with the preferred shares issuance, all this corporate paper hitting the street is having the effect of keeping corporate spreads wide, even as the equity markets are powering ahead.  Normally, the yield spread of corporate bonds should narrow as the equity markets move up - showing more confidence in the corporate sector in general.  This time, however, equities are on their own.  Corporate spreads have barely moved since widening significantly during the summer despite equities trading back to their highs.



The CAD$ is taking a breather, lower against the majors this morning.  The greenback is gaining back some ground, as can be witnessed by the sharp drop in the price of gold.  The continued weakness in the big dollar is starting to make the political spotlight, not just the economic one.  Once the politicians weigh in, all bets are off!  Anything could happen, but most likely it will be an ill-thought attempt to legislate the dollar higher.  At least our governor Dodge realizes there's little he can do, outside of setting rates, to influence the Canabuck.


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