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Market Commentary

June 29, 2011

Rates have moved much higher over the past 24 hours. The bond market sold off steadily on Tuesday as the continuing efforts in Europe to stave off a Greek default appear to be bearing fruit. Positive progress in debating a package combining spending cuts and tax increases yesterday will be voted on later today. As the Greek dilemma had been a primary cause of rates declining so much over the past month or so, it is not surprising that a positive near-term resolution should unwind some of that activity.

 

Adding fuel to the selloff this morning was a surprisingly strong May inflation report for Canada. The market had expected YoY inflation of 3.3% but got 3.7%. The Core inflation reading, which excludes volatile food and energy components (and is the one the Bank of Canada bases rate decisions on), was up 1.8% Year over Year (exp. +1.5%), and 0.5% Month over Month (exp. +0.2%). This 1.8% YoY reading for Core Inflation is below the 2.0% the Bank of Canada is targeting, so there is still a bit of room but obviously less so than the market thought yesterday.

 

Some important data out Thursday includes Canadian GDP growth for April, and the Chicago PMI.


by First National Financial LP 29. June 2011 04:39