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Daily Market Commentary

Just like that, focus has been turned back to credit as the Fed has more or less put a gun to the big banks heads and told them to bail out the credit markets with an $80 billion liquidity pool.  The anticipated Montreal Accord resolution has been postponed until the end of the year, saddling those sitting on "30 day" ABCP for another couple of months of un-sellable paper.  Essentially, the Fed/Banks solution creates a liquidity forum whereby stagnant paper can be shifted from those with short term requirements to those with longer duration requirements in a more efficient manner.  It remains to be seen if it will work.


Markets around the world are not reacting positively to this.  Perhaps equity investors had forgotten that this whole credit thing was a problem.  We've long been saying that the credit and equity markets aren't flashing the same signs, and we were waiting for one to align with the other.  As credit had been following equities since the eruption in late august, today it looks like stocks will fall in line.  Equities are in sell mode and non-credit bond markets are higher.  The Bank of Canada will announce at 9am.  We'll listen to their take on the credit markets, as they are widely expected to leave rates unchanged here.  The BoC hasn't generally surprised the markets, so we'll listen closely to the comments.


  Currency markets are acting predictably with the nervousness.  US$ gaining a bid on flight to quality, and the Yen is trading higher as risk carry trades are unwound.  All others are trading lower, including the CAD$.



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