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Market Update

What a difference a day makes! The rout in commodities has made the Loonie into becoming the worst performing currency, falling from a premium to the 97.50 area. Short term Treasury Bills have fallen 50 basis points overnight to 1.5% in the three month term. They now stand at an unprecedented 200 basis points below Bankers Acceptances. The Bank of Canada meets again on April 22 and is almost certain to match the Fed's 75 basis point cut.

 

 On the recession watch, US Initial Jobless Claims soared to 378,000 and Canada's leading Economic Indicators plunged by .3% versus a consensus increase of .1.

 

Watch for the US LEI and the Philly Fed releases at 10:00.

 

US regulators have given Freddy Mac and Fanny Mae increased room to buy up mortgages to the tune of at least $ 200 billion. This added liquidity should help to mitigate higher mortgage yields. Despite the efforts of the Fed, mortgage yields have risen to 6% in the US.

 

Closer to home, BMO was able to restructure its two ABCP trusts and we place this in the good news territory.

 

Canada Housing brought two tranches to the market, a $ 2 billion 3 year at 67.5 over the curve and a $9 b. 5 year at 58 over. These issues sold out right away  and, wait for it, spreads actually tightened in the aftermath of the issuance. After all, they are genuine AAA bonds, 100% guaranteed by your friendly Federal Government. Should this yield gap persist, it would not surprise this scribe if the Government steps in and borrows the money in its own name, saving us taxpayers millions of interest dollars.

 

 



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