Bonds have come back off the boil as investors try to figure out whether or not the European banking system might weigh any further on the global recovery following a recent poke at its methodology. Yields slumped on the news that Europe’s bankers might not have fully reported government debt on its books but as the shock wears off it seems that investors might be willing to return to business as usual. The lack of transparency in the reporting, even if were true, fails to answer the obvious question of whether or not the latest news increases the likelihood of a government default. It is hard to say at this point, however, that markets have brushed aside the report. However, firm action from the Bank of Canada quickly soured sentiment mid-morning reminding bond traders that recovery is out there – somewhere.
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