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Daily Market Commentary

Despite the bond markets being relatively quiet, other markets are humming.  As mentioned above in the launchpad, the greenback is in virtual freefall.  Yen is the currency of choice this morning, which makes sense given the recent relationship between equity futures (risk taking) and the Yen.  Swiss Francs and CAD are running a close second, and we're only surprised by the strength of the CAD$ because of its status as a risk currency.  With Oil and Gold soaring, and the Conservatives threatening to streamline government by eliminating the massive overhead of legacy yes-men that is the senate, we see reason for strong loonies this morning.

 

  Bonds are ticking slightly higher, predictably with pullback in risk taking mentioned above.  Particularly the short end is rallying this morning, we are seeing the curve steepen somewhat although there is strength at all maturities.

 

Mortgage applications for the week came in lower, although productivity numbers soared while labor costs dropped.  The latter numbers are positive for the economy in the long term, and disinflationary.  All this has spun out into positive bond news sending the 10 year treasury to 4.33%, flirting with lows of this cycle.  It will be interesting to hear the Fed's next round of comments.  We still don't consider inflation to be a problem, nor does the bond market.  More cuts should be on the way out of the US.  With the CAD$ trading into a 1.10 handle this morning, we would expect cuts coming from the Bank of Canada sooner than the market is discounting as well.  Keep in mind that whenever the cycles of disinflation start in earnest, the inflation fears are usually at or near their highest.

 



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