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Unless you rolled out of bed and are reading this on a Blackberry, you've no doubt heard about the Quebec court ruling regarding BCE.  We are admittedly surprised by the ruling, having though the court would go with the letter of the law (as long as the buyout group promised to keep the head office of BCE in Montreal...).  No doubt BCE will be appealing to the supreme court.

Given the reluctance of the financing banks in the first place, we think they will grasp at this to have the deal drastically repriced, or shuttered altogether.  They've got their own set of problems (witness RBS, one of the financing group, raising money of their own at a 46% discount to market 3 weeks ago), without having to finance $30 odd yards of debt.

Bell bonds are indicated higher this morning.  So far we are only seeing indications on the long bonds (2035 maturity) indicated at 5 points higher than yesterday.  We will keep you updated on the Blackblog as to the shorter maturities and coupons.

Yesterday's bond action was some of the most volatile we've seen in weeks, as strong Cdn CPI had traders rethinking a two year bond that trades below the BoC overnight rate.  While CPI is still within the Bank's comfort zone, the market is adjusting and perhaps realizing further rate cuts are not needed.

In the US, the FOMC minutes from the last meeting were released.  The Coles Notes version is that while the Fed sees a weak economy, they aren't biased to cut rates more as looming inflation is also a problem.  This seems to make sense.  Rates are already VERY low, and ignoring food and energy inflation, central banks around the world have been literally dumping liquidity into the markets, which in the end is very inflationary.

Canadian retail sales were much weaker than expected (coming in at 0.1%, 0.0% ex-autos), and last month's were revised even further downward.  Perhaps the Canadian household is reaching its breaking point?  Strangely, the Canadian bond market is more or less ignoring this data and continuing to droUnless you rolled out of bed and are reading this on a Blackberry, you've no doubt heard about the Quebec court ruling regarding BCE.  We are admittedly surprised by the ruling, having though the court would go with the letter of the law (as long as the buyout group promised to keep the head office of BCE in Montreal...).  No doubt BCE will be appealing to the supreme court.



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