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1.25%

Some economic data out for Canada today, but nothing really worth mentioning, the IPPI (Producer prices) are up 2.1% for the year as a whole, down from 2.4% in October, but the bulk of the increase has been in energy prices – who hasn’t noticed the prices at the pump recently? And metals. The rest has been relatively quiet, and somewhat lower than the CPI…

More interesting is the differential in Canada/USA bond rates – the Canadian 10 year Treasury bill is currently 125 bps lower than its American counterpart, despite short rates being 100 bps higher in Canada than in the US. There are two principal reasons:

Canada benefits from a healthy energy and metal export market – not the largest exporter but doing well (grain prices are also a historical high, and Canada is one of the largest grain exporters in the world).

Second, and probably more important, Canada is the only OECD country that has a plan to reduce government deficits, is not using competitive devaluations (CAD trades a parity with the USD).

Finally, corporate taxes are low in Canada and falling – by 2012 corporate taxes will be 15%!

Finally, Happy New Year to all

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