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Daily Market Commentary

While there is no data this morning, the rest of the week is packed full, so given the "quiet" trading week last we should see an uptick in volumes.  I use the term quiet loosely to describe last week.  While volumes were lighter than usual, the action was anything but.  Credit spreads had their worst week in years, and it happened in 3 days instead of 5.


  This week should be interesting as the banks are set to start reporting, beginning with the BMO tomorrow.  We're very interested to hear if they give any more indication of the status of their ABCP holdings.  There was some brief press over the weekend, which told us absolutely nothing we didn't know already besides that the deadline is looming and there are "several options" for finding the way out of the problem.  The only two options I see are extending term on the paper, or having the backing banks purchase the paper.  The former hurts the current holders as much higher yields will be demanded to purchase 5 year paper, and the latter will tie up huge amounts of capital on the books of the banks such as Deutsche.


  The investment world seems to be breathing a sigh of relief this morning.  The thanks for the day goes to the shoppers.  They were out in force over the weekend in the US, and that is now being analyzed to death for its implications on the overall economy.  In the end, its more or less the same situation as last year.  Huge discounts entice out the shoppers, and it all comes down to how much margins are squeezed.  We won't know that for 3 months, so we will choose to go with the themes we already know.



The yield curve is flatter this morning, as it generally is when equity futures are showing gains.  Lower short term bonds are a sign that traders see the need for Bank rate cuts easing.  Keep in mind this swings daily.


Notably, the CAD$ is not following its normal course.  We usually see them stronger as risk taking returns to the markets.  As Oil, equities and gold rises, we normally see the CAD$ gain ground.  Today, however, loonies are flat on the day, and lower against the world majors.



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