Money Market Commentary

As of November 30, 2011

Globally, the expectation is for low economic growth with the Bank of Canada (BOC), in its latest Monetary Policy Report (MPR), setting its growth projections for the country at 2.1% for 2011, 1.9% for 2012 and 2.9% for 2013.  These are downward adjustments from the last MPR in July.  In its report, the BOC noted that the outlook for the economy had weakened in the light of external factors in Europe and the US.  

Market Synopsis
In September 2010, the BOC raised its key overnight lending rate (OLR) to 1.00% from 0.75%.  The rate has been at 1.00% since this time. The OLR is the rate that the BOC expects financial institutions to use when borrowing and lending amongst themselves overnight. It is widely believed that the BOC will hold off on more rate increases until more evidence of a sustained Canadian recovery are evidenced.  The consensus, in light of recent global economic data, suggests that the BOC will hold off on any rate increase until the second half of 2012. 

Fund Positioning
During the month of November, Canadian 3-month T-Bill yields fell from 0.88% to 0.86%; the 6-month T-Bill yield rose from 0.90% to 0.91%; and, the 1-year T-Bill yields rose from 0.88% to 0.92%. This resulted in the yield curve becoming more steep over the 3-month to 1-year horizon.  The Fund has been increasing the duration of its investment portfolio over the month of October.

Market & Fund Outlook
The Excel Money Market Fund continues to be primarily invested in short-term, highly-liquid securities and we continue to monitor developments in the Canadian economy and the Canadian monetary policy.

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