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Daily Market Commentary

Given the implosion of the rest of the risk markets, we'd have expected treasuries and Canada government bonds to get a better bid here.


Throw in the fact that Dodge is on the record saying the strong dollar is out of control and is "out of sync" with domestic factor, and I'm thoroughly confused.  What does make sense is the ongoing credit concerns finally being reflected in other markets besides the corporate bond and commercial paper sectors. Keep in mind, however, the two year Canada is subdued at 4.11%.  Canadian bond traders are far more complacent than the economy watchers in the US, where the two year is trading at 3.78%.  The two year is less directly influenced by the level of Fed Funds than is the T-Bill market.  The Daily FI snapshot shows the incredible 40 basis point drop in two years over the last 5 trading sessions.  Interestingly, the treasury market was pointing towards trouble before the big drop in equity indexes.


The highly unreliable (but interesting to watch for market sentiment) Fed Funds futures are now pricing in a 70% chance of another cut at the Oct. 31 meeting (this was at 25% chance one week ago), and 4% even by the end of January.


  There is no economic news out today, and the calendar is pretty thin this week.  As it stands now, it looks like the market will be taking its cues from fear.



As the flight to quality ramps up, and risk aversion increases, the Yen powers forward, followed by US$.  All other currencies are weaker, including the CAD$



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