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Market Update

Quiet start to the morning, with the greenback continuing its downward trajectory against all currencies save the Yen.  Bonds are mostly unchanged to slightly lower as the market re-adjusts its expectation of Bank of Canada policy.  Best case now, as indicated by BAX futures shows no action in the overnight rate well into 2008, and some Bank watchers on the street are starting to revise the outlook to rate hikes into 2008.  We'd have thought the strong dollar would do the work for us, but the pressures continues even in Ontario as our economic numbers surprise on the upside over and over again.


  Corporate issuance yesterday confirmed our confusion.  By that we mean that spreads for high quality corporate paper continue to be way wider than the market.  Each issue (yesterday was HSBC) is priced at a large discount to market.  This makes us think the issuers are "motivated" to get their paper out the door.  They are all selling well, mind you, but as the stock market powers forward without a care in the world, why are corporate spreads getting wider and wider with every new deal that hits the street?


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