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Daily Market Commentary

The new year is coming in with plenty of data for the market to chew on.  ISM numbers will be out this morning and employment numbers on Friday, so if we actually see any volume in the market we could be up for some moves.



Bonds are starting the year little changed from their 2007 close levels, although other interest rate markets are moving.  The TED spread has narrowed significantly over the holiday.  It is yet to be seen if the credit environment is truly easing or if the big lenders were just slowing down their activity and putting some lipstick on their balance sheets.  With the TED sitting at 150, we are significantly better than the plus 200 levels we were at a couple of weeks ago.


  Corporate credit spreads also seem to be starting the year slightly better than they closed out 2007.  As mentioned in Monday's FI Snapshot, we will be watching for the high end credit to narrow (and stay that way) as a sign that at least SOME risk taking is coming back to the bond markets.  When appetite comes back to provincials (as it is starting to for Canada government agencies), we will start to feel more comfortable with higher end corporate credit as well.



The CAD$, while stronger against the greenback, is mostly lower.  The US$ is getting hit to start the year, down against all majors except the Pound.  The CAD$ has a lot of work to do to keep up to 2007, where it was the second strongest currency in the world (next to the Brazilian Real).  Many analysts are calling for the resurgence of the US$ this year.  We have a hard time seeing positive territory for either currency, in the shorter term.  With both our economies cutting rates, and the US still in the midst of the worst housing recession seen in years, the only thing that would be positive to the big dollar would be a flight to quality should the rest of the world catch a cold.


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