Financial Update

It's the only time in history that this has happenedIt’s the ONLY time in HISTORY this has happened!
Oil spikes US$25 a barrel on anxiety over U.S. bailout, short covering Oil prices briefly spiked more than US$25 a barrel Monday, shattering the record for the biggest one-day gain as unease about the government's $700 billion bailout plan pummeled the U.S. dollar and spurred investors to buy safe-haven assets. The rally came as energy traders grappled with the implications of the government's proposed initiative to stem the U.S. financial crisis by absorbing billions of dollars of banks' bad mortgage-related securities. U.S. congressional leaders endorsed the plan's main thrust, saying passage might occur in a matter of days. But they also want independent oversight, protections for homeowners and constraints on excessive executive compensation
· TSX -274.92pts Anxiety over the plan also sent stocks sharply lower; the credit markets were calmer than they were last week, but still showing the effects of investors' nervousness. Investors fear that the government will have to dramatically ramp up borrowing to pay for the mammoth rescue effort, an inflationary move that could further devalue the dollar and trigger another wave of safe-haven buying in investments like commodities.
· Dow -372.75pts
· Dollar +1.53c to $96.71US. They're going to have to continue auctioning off a whole lot of Treasurys to finance these projects, so the US dollar is going to suffer," said Matt Zeman, head trader at LaSalle Futures in Chicago. Clearly, financial markets decided today was the day to be spooked about the U.S. dollar and we’ve had a flight to other currencies as well as commodities," said Avery Shenfeld, senior economist at CIBC World Markets as the loonie hit a 7 week high. George Davis, chief technical strategist at RBC Capital Markets said the Canadian dollar has a 65 to 70% chance of rising above the U.S. dollar in the next 4 weeks
· Oil +16.37 to $120.92US per barrel There is still much uncertainty about what impact the U.S. rescue plan will have on energy demand. Oil's run-up near $150 a barrel in July and a weak U.S. economy has forced Americans to cut back on their driving and led business to scale down operations.
· Gold +43.30 to $903.90US per ounce Gold is benefiting from renewed interest as a haven from risk because jitters in the financial system spook investors

Where can you track potential interest rate movements?

You can track 30 day Banker’s Acceptance rates and watch the spread between Prime and 30 day BA's at http://www.bank-banque-canada.ca/en/rates/interest-look.html

If that spread narrows from the historical average of 170pts, then there is pressure on ARM rates to move. The other indicator, but harder to find, is swap rates. Below is a chart showing the past weeks spread narrowing daily from the desired 170 pts, indicating impending increases in ARM rates.

Prime rate
4.75

less Bankers Acceptance

Definition: banker's acceptance
A short-term credit investment created by a non-financial firm and guaranteed by a bank. Acceptances are traded at discounts from face value in the secondary market.
Bankers' acceptance are very similar to T-bills and are often used in money market funds.