Expect Canadian government bonds to rally as investors flee from risk should Greece exit the euro, says TD's Doug Alexander. As Canadian bond yields sink to new lows, "they would still underperform US Treasurys," noted Alexander, adding that the loonie would "weaken substantially" against the US dollar. Furthermore, if interbank funding markets are disrupted and bank funding costs rise, Alexander sees the Bank of Canada slashing rates to 0.25% with unconventional monetary policies (ie, quantitative easing) on the table if the economy continues to sour.
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