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Daily Market Commentary

 Bonds are slightly weaker this morning, as the AMBAC save you've already read much about has buoyed the equity markets at the expense of the risk free areas of the market.  Technically speaking, the bond market looks overbought.  With two year treasuries trading at 2.07%, they are off of their recent highs (they peaked @ 1.88% on Feb 14th), but still well below Fed Funds.  In fact, Fed Funds futures are currently discounting an eventual 2.25% as the most likely path (expected by this summer).  Of course, Fed Funds futures are a notoriously poor predictor of the target rate, but certainly get the direction right.  If we are to look at two years @ 2.07%, they still seem expensive.


The loonie is also soaring this morning as risk takers come back into the market and push us back to par.



We the bond watchers were all interested about the Co-Operators - Addenda agreement.  Essentially Addenda will be bought by the Co-Operators and merged with their asset management unit  (it will continue to operate as Addenda) and receive $26.50 a share.  Addenda, which has been declining along with other financials, has been a steady performer and was paying a healthy 6% dividend before this announcement (I guess the managers were big fans of cash flow).  There is some value in the bond money managers after all!



  Existing home sales will be out later this morning, once again expected to print a low number just under 5 million.  Home sales peaked north of 7 million in late 2005.  As the "volume" indicator of the housing number, as technicians we should have noticed that volume was declining quickly as prices rose throughout 2006 and early 2007 - never a healthy sign.  Of course looking backwards never helps us, so we will wait until people do not even pay attention to housing numbers before we call this downturn over.  We've beat this drum before, but there will not be a V shaped recovery in housing.


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