The economic calendar continues to be light

Posted: Wednesday, January 10, 2018 - 09:16 EST

The economic calendar continues to be light today, although Minneapolis Fed Chair Kashkari spoke yesterday.  He commented that low-inflation around the world, not only in the U.S., continues to be a risk, and the signals are worth watching.  In his eyes, the economic recovery has been slow, although forward looking equity markets are showing optimism on global economic growth.  Otherwise, several of the Canadian banks have commented on the effect of the lower U.S. corporate tax rate on their deferred tax assets.  As a result of the lower tax rate, Canadian banks with U.S. operations will be most affected by the one-time impact; although a reduction in future income taxes will be positive.  TD will see a reduction to CET1 ratio by 9bps, BMO’s CET1 will decline by 15bps and RBC’s impact will be a decrease of 5bps.  The remaining big six banks, CIBC, Scotia and National Bank, did not give exact figures, although the impact will be immaterial to mid-single digits.

The new issue Canadian corporate credit market was active for the first time this year, with ManuBank issuing a five year deposit note that priced at 84bps over the curve.  As corporate credit has been strong to start the year, the new deal was oversubscribed with 74 buyers, and fills in the 5% range.  In the secondary market, ManuBank deposit note spreads continued to tighten by 4-5bps.  Otherwise, broad based spreads continue to grind in another 0.5-1bps, with continued focus on NVCC.

Equity Markets:

 

  Index Level % Change QTD YTD Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017
S&P 500 2,751.29 0.13% 2.96% 2.96% 3.85% 3.82% 6.07% 3.09% 4.48% 6.64%
TSX

16,319.24

0.01% 0.73%

0.73%

5.45% 4.53% 2.41% -1.64% 3.68% 4.44%

Rates:

 

Today

% Change

QTD change

YTD change

Sept 30 2016

Dec 31 2016

Mar 31 2016

June 30 2017

Sept 30  2017

Dec 31  2017

Canada 5 Year

2.027%

0.05% 0.16% 0.16% 0.615% 1.150% 1.119% 1.393% 1.753% 1.866%
Canada 10 Year 2.227% 0.07% 0.18% 0.18% 0.990% 1.750% 1.625% 1.762% 2.099% 2.045%
Canada 30 Year 2.442% 0.09% 0.18% 0.18% 1.658% 2.350% 2.302% 2.148% 2.472% 2.266%
30yr Generic Corporate A rated Spread 1.210% 0.00% 0.00% 0.00% 1.530% 1.390% 1.330% 1.210% 1.240% 1.210%
30yr All-in Corporate A rated Yield

3.652%

0.09% 0.18% 0.18% 3.188% 3.740% 3.632% 3.358% 3.712% 3.476%
US 10 Year 2.595% 0.04% 0.19% 0.19% 1.60% 2.50% 2.39% 2.31% 2.33% 2.41%
CDX IG 47.176 1.559                

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.