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Daily Market Commentary

Most of the action in Canada this morning is holding off until the Bank of Canada announces their rate cut this morning.  Bonds are trading slightly lower this morning before the release, from yesterday's mostly mixed close.  The consensus was exactly split between 25 and 50 bps for the cut, even though the short T-Bills are now sub 3% all the way out the curve to one year.  We will have more cuts down the road.



TD Bank tapped the market yesterday for $200 million in preferred shares.  These were issued at a 5.60% yield, same as BNS's most recent pref issue.  These were issued as perpetuals, non-cumulative.  We are still looking for some of the terms on these new issues to favour the investors, rather than the issuer.  So far, it hasn't happened in Canada.  How about a cumulative dividend, an end date or a put feature?  Investors are already voicing their preference of debt without any fancy options attached to them.  Straight discount notes are trading at 10 to 15 basis point premiums to similar fixed floaters, even though we don't expect any of these FF's to actually float at any time in their lives.  Structured product is definitely on the outs, as it should be, in our opinion.



CAD$ are holding onto their recent strength, but much will depend on the statement accompanying the Bank's release this morning.  Watch for some volatility. 


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