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Daily Market Commentary

Bonds moved higher yesterday and corporate spreads moved wider, particularly in the financial space.  Merrill's terrible earnings report put a scare in the financial stocks and the financial bonds, as a consequence, did not participate in the bond rally.


This morning, US Durable goods orders printed negative for the second month in a row.  Bonds were trading down before this, but these have put a bid under the short end.  Add to that weekly jobless claims slightly higher than expected, and the bets are being made as to how many quarter point cuts the Fed will get in before the end of the year (the next one comes next Wednesday).  Rumours of a possible Fed Discount Window rate cut swirled around, sending equities higher.  It seems doubtful, however, that they would do this 5 days before a Fed meeting, unless there was a full blown liquidity emergency.


  Scotiabank issued a billion five year (float to ten) subordinated notes yesterday, which went out cheap to the market and sold very well.  There is still a lot of money on the sidelines waiting to buy newly issued bonds.  It helps that most of these deals are being offered at a discount to existing market levels, but the fact that they continue to sell extraordinarily well in the face of financial problems like unresolved ABCP issues lends some confidence.


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