Financial Update May 28, 2009

 TSX-143.74 as the surging bond yields fueled concerns that consumers and businesses could face higher charges for mortgages and other loans.

 DOW -173.47
 Dollar -.13c to 89.33USD
 Oil +$1.00 to $63.45US per barrel
 Gold $.10 to $953.20USD per ounce
 Canadian 5 yr bond yields +.21bps to 2.58- Four weeks ago it was 2.01 (that’s up .57). The spread, based on 5 yr rate of 3.89%, so is lower again at 1.31%.
 http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us

Historically spreads have been 2.25%. With today’s spread of 1.31%, rate increases are imminent. Plus, this happened on a day when the TSX dropped (usually when the stock market goes down, bonds yields go down too). We expect other lenders will be increasing rates over 4% as early as today - Xceed and Laurentian have already moved up

The yield, rate of return on your bond, can be read through a yield curve, which is the pattern of yields on bonds. This increase in bond yield is something to watch. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise