Technology stocks are leading a surge in stocks this morning. This comes a day after yesterday’s significant gains in large cap stocks. Today’s move is precipitated by a modest retreat in bond yields which have been the ongoing focus of the market for the last few weeks. Positive sentiment is the order of the day and the move in stocks reflects that mood but there is ongoing concern that long term bond yields will continue to creep up in response to a red-hot economy on both sides of the border. As we described in yesterday’s note, you can expect the USD to CAD to be negatively correlated to bond yields in the near future. And today that is the case, as the Loonie is up 0.3% this morning as 10 year yields retreat from recent highs. That takes a little of the pressure off of tomorrow’s Bank of Canada release which will have to balance a message of ongoing support for the economy with an acknowledgement that the recovery is going faster and better than expected. Also tomorrow, US inflation numbers for February will be released and they may influence bond yields which in turn could move USD to CAD.
