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Daily Market Commentary

Another relatively quiet start to the day, today... with some crazy undercurrents.  The Montreal Accord for ABCP is set to expire tonight at midnight, and there has been no news announced on that front from our banks.  The big news has come out of the US, where Citi, BAC and JPM are in talks to create an $80 billion fund of garbage ABCP.  Makes me wonder where the buyers are going to come from.


Canada's Leading Indicators were slightly stronger than expected (as were vehicle sales), which is putting pressure on the bond market this morning.  As usual, the metrics in the Canadian market are looking better than those in the US, which has us continually wondering why our ten year yields are lower than theirs.


Inflationary indicators of gold and oil continue to be unbelievably strong.  As Gold blasts through $750 and crude flirts with $85, they are not agreeing with the long end of the bond market, which hovers only 2 basis points above the 10 year bond in Canada.  While short term inflation seems to be contained by a weak US housing sector and plenty of cheap labour, the longer term expectation continue to worry us.  As our population ages and retires, the workforce on this side of the pond will shrink keeping wage pressures high.  Of course, who invests with that kind of time horizon???


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