The FOMC released the minutes from its March meeting yesterday...

Posted: Thursday, April 12, 2018 - 09:42 EDT

The FOMC released the minutes from its March meeting yesterday afternoon that, indicating that the Fed is gaining confidence that inflation will soon return to its 2% target.  Members were willing to look through the softer Q1 economic data, which is expected to be transitory.  The tax reform enacted to start the year is expected to provide a significant boost to output over the next few years, although higher budget deficits and interest rates could lead to downside risks.  Overall, as shown in the dot plot chart, it was appropriate to set a slightly steeper path for the Fed Funds Rates than previously expected.  Markets are currently pricing in an 87% probability that the Fed will raise rates by 25bps at the upcoming June meeting.  The ECB also released minutes from its March meeting this morning that saw global economic risk tilted to the downside.  ECB members broadly agreed that there was not enough evidence that inflation will be sustained although it continues to move forward.  The removal of the easing bias should not be misunderstood with the current monetary policy stance being appropriate.

Despite the softer tone in the Canadian corporate credit market yesterday, CCL Industries came to the new issue market with a $300mil 10yr bond priced at +165bps over the curve.  This is the company’s inaugural Canadian dollar deal that saw 55 buyers and late fills in the 5% range.  The new bond continued to tighten in secondary markets as it provided investors with new name diversification in the industrial space.  The rest of the BBB space was generally softer with overall credit spreads ending the day mostly unchanged.

Equity Markets:

 

  Index Level % Change QTD YTD Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018
S&P 500 2,642.19 -0.55% 0.12% -0.64% 3.82% 6.07% 3.09% 4.48% 6.64% -0.76%
TSX

15,257.90

-0.03% -0.60%

-5.09%

4.53% 2.41% -1.64% 3.68% 4.44% -4.52%

Rates:

 

Today

% Change

QTD change

YTD change

Q4 2016

Q1 2016

Q2 2017

Q3 2017

Q4 2017

Q1 2018

Canada 5 Year

2.085%

0.04% 0.12% 0.22% 1.150% 1.119% 1.393% 1.753% 1.866% 1.969%
Canada 10 Year 2.220% 0.04% 0.13% 0.18% 1.750% 1.625% 1.762% 2.099% 2.045% 2.091%
Canada 30 Year 2.337% 0.02% 0.11% 0.07% 2.350% 2.302% 2.148% 2.472% 2.266% 2.228%
30yr Generic Corporate A rated Spread 1.240% 0.00% 0.00% 0.03% 1.390% 1.330% 1.210% 1.240% 1.210% 1.240%
30yr All-in Corporate A rated Yield

3.577%

0.02% 0.11% 0.10% 3.740% 3.632% 3.358% 3.712% 3.476% 3.468%
US 10 Year 2.794% 0.01% 0.05% 0.39% 2.50% 2.39% 2.31% 2.33% 2.41% 2.74%
CDX IG 62.493 -0.892                

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.