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Daily Market Commentary

Apparently inflation is still on policy makers minds across the pond as the ECB and the BoE kept their benchmark rate unchanged.  The market didn't like this development at all.  Equities have been sent lower, bonds higher.  Euribor and Libor both have spiked higher, making it more expensive for businesses to borrow short term funds.  The TED spread has jumped to 163 this morning, another worrying development as it has been ticking higher for a couple of weeks now after "bottoming out" at about 80.  Recall that during "normal" credit times, the TED spread usually sits around 20.



  To go along with this TED news, which measures the big institutions willingness to lend amongst each other, we have noticed an interesting phenomenon back home.  The big banks, which traditionally would invite each other into syndicates to sell their own debt issues  (i.e.. RBC would invite TD to sell its own debt issues), have stopped doing this.  they are now running their own programs and not outsourcing any of the syndication.  Be it an attempt to keep fees down, or a protectionist move to stay away from the other institutions' issues, it is somewhat alarming.



  Yesterday, RBC issued a new fixed floater.  Fixed @ 4.84% for 5 years, then floating at CDOR + 200 for the next five.  They sold it by themselves at Canada yield +170 bps.  Two thing to note about this deal: 1) the spread @ 170 over Canadas is big, especially for the Royal, and 2) The new fixed floater terms are CDOR +200, where CDOR + 100 used to be the standard.  We are still not worried that any of the bank fixed floaters will be extended while they can still issues BA's (if they can't we've got bigger problems), but incentive is incentive.






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