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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (58691)	10/27/2006 9:26:34 PM
From: RealMuLan	Respond to of 116555

Canadian Bonds Rise as Investors Speculate on Interest-Rate Cut By Haris Anwar bloomberg.com Oct. 27 (Bloomberg) -- Canada's 10-year government note rose for a third-day, its longest winning streak in more than a month, after a report showed the U.S. economy slowed more than expected. Yields on these notes fell to the lowest in more than two weeks on speculations that a U.S. slowdown may prompt the Bank of Canada to cut interest rates in 2007. Canada's economy may suffer from the U.S. slowdown because it ships more than 80 percent of its exports to the U.S. ``The weaker-than-expected U.S. growth number adds to the odds that the U.S. Federal Reserve, and the Bank of Canada will have a room to cut interest rates,'' said Avery Shenfeld, senior economist at CIBC World Markets in Toronto. ``The bond market has grown skeptical that there will be rate cuts in 2007, but softer growth numbers have re-ignited these hopes.'' Yields on benchmark 10-year notes fell 3 basis points, or 0.03 percentage point, to 4.08 percent at 11:47 a.m. in Toronto, touching the lowest since Oct. 9. The price of the 4 percent note maturing June 2016 rose 25 cents to C$99.35. Prices rise as yields decline. Two-year note yields also dropped by about 3 basis points to 4 percent. The price of the 4 1/4 percent note maturing December 2008 rose 5 cents to C$100.48. The U.S. economy grew at a less than forecast 1.6 percent annual rate last quarter, the slowest pace in more than three years, as housing slumped and the trade deficit widened. The U.S. government's first estimate of the quarter's gross domestic product, the value of all goods and services produced in the nation, shows growth slowed from a 2.6 percent pace in April through June, the Commerce Department reported today in Washington. A measure of inflation watched by the Fed eased. Mild Slowdown ``We're pretty close to the bottom,'' said Stewart Hall, a market strategist at HSBC Securities Canada Inc., in Toronto. ``Central banks are pretty contend with their interest rate policies at this time, and we're unlikely to see rate cuts before the mid of 2007.'' Canada is experiencing a ``mild'' economic slowdown, as weaker U.S. demand tempers domestic spending that has helped push output beyond full capacity, Bank of Canada Governor David Dodge said on Oct. 25. Central bank policy makers on Oct. 17 kept the benchmark overnight lending rate at 4.25 percent for a third-straight meeting, and cut their economic growth forecast for this year and next because of slower exports. Economists surveyed by Bloomberg News from Oct. 2-10 predict the central bank will keep interest rates unchanged through the third quarter of next year. March bankers' acceptances futures yields fell to 4.27 percent from 4.28 percent yesterday, indicating more investors are betting the central bank may lower its 4.25 percent benchmark rate before then. Bankers' acceptances futures settle at a three-month lending rate that has averaged 16 basis points, or 0.16 percentage point, above the central bank's rate target since Bloomberg started tracking the difference in 1992. Canada's dollar rose to 89.41 U.S. cents, from 89.04 U.S. cents yesterday. One U.S. dollar buys C$1.1185. To contact the reporter on this story: Haris Anwar in Toronto at Hanwar2@bloomberg.net