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Daily Market Commentary

The tone today is much the same as yesterday.  After factory orders in the US came in line with expectations, bonds drifted lower throughout the day.  It was a strange day as equities, bonds, and commodities dropped, as did the greenback.


  This morning, as equities futures decline once a gain, we are seeing a little strength in the bond world.  Expect government to outperform once again, as rumours are surfacing about more banks requiring large amounts of funding.  This time it is Royal Bank of Scotland and Barclays rumoured to need large sums of capital to shore up the balance sheets - please remember this is just a rumour at this point.



  If you were wondering why GMAC's had such a high yield (now in the 10-11% range), the answer came this morning as they announced a loss of over $700 million and blamed it specifically on home owners missing their mortgage payments.  GMAC's purchase of ResCap LLC in 2006 could not have been timed worse, as that unit was responsible for $921 million of the losses announced.  ResCap has been one of the bigger players in the subprime and Alt-A mortgage market in the US.  ResCap cut their staff by a third in 2007 in an effort to stem the losses caused by record foreclosures.



ISM non-manufacturing hits the tape at 10 am today, so watch for some volatility should that come out of line with expectations.



The Loonie is losing a little ground this morning on flight to quality.  It is down against all the usual suspects, except the Yen.  Aussie dollars are slightly higher this morning, as the RBA raised rates once again to fight inflation.  This was expected and is mostly responsible for the rise of the A$ almost to its cycle highs from October.  Australian overnight is now sitting at 7%.



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