29. June 2011 04:39
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.