Monday's Trade

I am updating on the trade for weekdays, because its important to note that the GBN.V share price is moving inversely to bond prices. A good inverse correlation exists between the giant U.S. bond market, but there is an even closer inverse correlation between GBN.V share prices and long term Canadian bonds.

GBN.V shares advanced, then fell inversely today to the CBOT futures contract for the long bond in the U.S., but there is one chart that aught to send a chill down your bones, since the low on this chart(bond yield, not price) corresponds exactly with the lows in GBN.V shares.

Very probably there's and ETF(Exchange traded fund) or CDS(Credit Default Swap) that trades on Canadian markets through the TSX between delta one desks in commercial banking that traders know about. There isn't any listed vehicle that the public can access, such as you would find in U.S. markets.

In the absence of any buyers, and they would have to be buyers in volume, the sellers are in control. The new low in yields (or new high in bonds) corresponds directly with the new low in November in GBN.V shares. I would say this is what you call a 'Jitney Trade.'

News out of the rating agencies downgrading European bond markets across the board brought fresh buying into treasuries temporarily. No news as of yet on the results of the bond auction in the U.S.

source: http://www.bankofcanada.ca/rates/interest-rates/canadian-bonds/

-F6