The focus today will be on U.S. bank earnings...

Posted: Friday, April 13, 2018 - 09:32 EDT

The focus today will be on U.S. bank earnings, with JP Morgan and Citigroup announcing this morning. and Wells Fargo releasing preliminary results.  Q1 2018 earnings for JP Morgan beat estimates, with record revenue and profits for the quarter.  Net income for the first quarter was reported at $8.7 billion.  The spike in volatility to start the year contributed positively to equity trading revenue, although fixed income trading remained flat in the quarter.  As the Fed continues to raise interest rate, net interest income at JP Morgan was boosted higher, increasing by 9%.  Citigroup also beat estimates and reported net income of $4.6 billion.  Similarly to JP Morgan’s results, Citi’s equity trading help generate the highest revenues since 2010 as a result of the volatility, however fixed income trading continued to be pressured, falling 7%.  Capital remains strong at both banks – the CET1 ratio for JP Morgan currently stands at 11.8% while Citigroup’s ratio is 12.1%.

The Canadian corporate credit market was active yesterday following Scotiabank pricing a $2.25bil 5-year deposit note at +84bps over the curve.  As the deadline to grandfather deposit notes approaches, there could be a final push for issuance leading up to September.  Overall, the lack of domestic funding by the big six banks this year led to strong demand and 96 buyers in the new deal.  Outside of new issuance, concerns around geopolitical risks eased yesterday, leading to a more constructive tone.  Overall, spreads ended 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 2,663.99 0.83% 0.95% 0.19% 3.82% 6.07% 3.09% 4.48% 6.64% -0.76%
TSX

15,269.27

0.07% -0.52%

-5.02%

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

2.134%

0.07% 0.17% 0.27% 1.150% 1.119% 1.393% 1.753% 1.866% 1.969%
Canada 10 Year 2.277% 0.08% 0.19% 0.23% 1.750% 1.625% 1.762% 2.099% 2.045% 2.091%
Canada 30 Year 2.391% 0.07% 0.16% 0.13% 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

3.631%

0.07% 0.16% 0.16% 3.740% 3.632% 3.358% 3.712% 3.476% 3.468%
US 10 Year 2.836% 0.00% 0.10% 0.43% 2.50% 2.39% 2.31% 2.33% 2.41% 2.74%
CDX IG 60.116 -1.607                

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.