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Daily Market Commentary

Just as it was looking like the CAD$ was running out of legs, a massive shot of adrenaline called jobs numbers sent it rocketing ahead.  We're now sitting a cent and a half higher than yesterday's levels.  The 9 hour "correction" in the loonie did take it down a penny, but as all the corrections have gone for the past several months - they are shallow and very short lived.

Huge jobs numbers in Canada, to the tune of 63,000 added in October (on top of 51,000 in Sept) when only 15,000 was expected by the market, on top of a multi-decade low unemployment rate of 5.8% has further hit the BAX futures, implying no moves by the Bank of Canada in the foreseeable future.

  US jobs also blew away expectations.  This significantly writes down the expectations of further Fed rate cuts for the time being.  Fed Funds futures are now showing a greater than 50% probability of no move at the next meeting December 11th.  The two year treasuries now look very expensive at 3.76%

Yesterday's strong bond rally on the back of weak equities was the biggest move we've seen in the treasury market for some time.  Canada underperformed, our rally being more muted.  Some of those gains are being given up on the jobs this morning, but overall it appears the full confidence is not back to take treasuries to higher yields discounting above trend growth in the future.  It seems strange - most of the headline numbers are coming in strong, including employment and GDP released this week, and yet there's still a massive unknown in the credit world keeping the yields on risk free assets well below where they would otherwise be trading.

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