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Daily Market Commentary

 The UK is following the US's lead in ways to bail out the economy.  Britain's central bank is allowing lenders to exchange their stagnant assets for gov't bonds in an attempt to get credit moving again.  While not a complete bailout, the banks still have to repay the credit, it allows the lenders to essentially borrow against assets that wouldn't be accepted as collateral elsewhere.



Bonds are trading lower in the US and flat in Canada.  It appears the bets are laid in Canada and waiting on the Bank's rate decision tomorrow will be the order of the day.  The street is calling for 50 bps, although the wisdom of that decision is being called into question.  We'd argue that especially after the light CPI report in Canada last week, the BoC certainly has room to move.  There is little they can do about food and fuel inflation, and those phenomena are actually deflationary in the longer run, as people will shift their discretionary spending.  Surprisingly, the CAD$ is still trading around the par level, even as our rates threaten to fall close in line with America's.  The majority of pundits are still calling for another 50bps out of the Fed on April 30th as well, so at this point, the BoC is playing catch up.



Bank of Montreal issued a new 10 year deposit note on Friday.  Initially projecting $400 million, once again they set the yield at a huge discount to market and blasted out $850 million in paper after way over-subscribing the initial deal.  This once again served to undermine the secondary market and had credit trading weaker on the balance of the week despite equities trading higher.  Golden Credit Card Trust also issued a multi-tranche deal.  They ran into some resistance selling this asset backed paper, but recall that this paper was around far longer than ABCP.  Asset Backed Paper where the maturities roughly match those of the underlying assets are still strong credit candidates and shouldn't be immediately dismissed.


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