Overseas buyers purchased $10.6bil of Canadian securities

Posted: Friday, June 16, 2017 - 09:39 EDT

Overseas buyers purchased $10.6bil of Canadian securities in April, down from the prior month purchases of $15.1bil.  The breakdown included buying of just under $13bil of bonds, offset by selling of $1.3bil of equities and $1.1bil of money market paper.  Year to date, investment in Canadian securities has totaled $71.1bil.  Canadian dollar strength continues to hold, following the Bank of Canada’s comments that they will potentially look at normalizing monetary policy later this year.  Probability of a rate hike by the end of the year has climbed significantly from 29% late last week to 79% this morning.  The Bank of Japan has decided to leave its monetary stimulus program in place as inflation still remains benign.  The policy maintains the purchase of government bonds that aims to keep the 10-year yield at 0%.  The overall assessment of the economy remained unchanged, but the BOJ believes it is “turning toward a moderate expansion”.

New issuance came to the Canadian corporate credit market yesterday, as issuers again looked to lock in funding costs prior to government rates rising further.  Laurentian Bank issued its inaugural NVCC sub-debt with a $350mil 10NC5 bond.  This is the first Canadian bank NVCC sub-debt that is rated below investment grade by a rating agency, at BB+ by S&P.  As a result, the new issue priced at a much wider spread than the other big 5 Canadian banks at +308bps over the curve.  Ford Credit Canada also issued $600mil 5yr bonds at +158bps over the curve.  Low oil prices continue to put pressure on energy related names, with spreads closing the day mostly unchanged.

Equity Markets:

  Index Level % Change QTD YTD Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017
S&P 500 2,432.46 -0.22% 2.95% 8.65% 6.45% 0.96% 2.44% 3.85% 3.82% 6.07%
TSX 15,160.42 -0.06% -2.49%

-0.83%

-2.23% 3.75% 5.06% 5.45% 4.53% 2.41%

Rates:

  Today % Change QTD change YTD change Dec 31  2015 March 31 2016 June 30 2016 Sept 30 2016 Dec 31  2016 March 31 2017
Canada 5 Year 1.165% 0.02% 0.05% 0.02% 0.727% 0.621% 0.569% 0.615% 1.150% 1.119%
Canada 10 Year 1.548% 0.02% -0.08% -0.20% 1.390% 1.225% 1.059% 0.990% 1.750% 1.625%
Canada 30 Year 2.063% 0.01% -0.24% -0.29% 2.147% 2.003% 1.714% 1.658% 2.350% 2.302%
30yr Generic Corporate A rated Spread 1.260% 0.00% -0.07% -0.13% 1.610% 1.510% 1.610% 1.530% 1.390% 1.330%
30yr All-in Corporate A rated Yield 3.323% 0.01% -0.31% -0.42% 3.757% 3.513% 3.324% 3.188% 3.740% 3.632%
US 10 Year 2.171% 0.01% -0.22% -0.33% 2.28% 1.77% 1.47% 1.60% 2.50% 2.39%
CDX IG 60.405 0.060                

The information contained herein is intended for advisors for general information only and is compiled from sources believed to be reliable, but no representation or warranty, express or implied, is made as to its accuracy. All opinions contained in the commentary and expressed by the portfolio manager are subject to change without notice and are provided in good faith without legal responsibility. All market data is sourced from Bloomberg.