The tone on both the equity and fixed income markets remains constructive

Posted: Monday, May 14, 2018 - 09:12 EDT

The tone in both the equity and fixed income markets remains constructive this morning following last week’s global rally.  However, equity markets in Europe are down marginally following comments from the ECB, that are being interpreted as slightly hawkish.  The ECB indicated that ending quantitative easing in September or December is rather insignificant as the ECB is getting closer to the termination of their asset purchases.  Despite the softer economic data to start the year, inflation will resume in the coming months and government debt concerns are not expected to delay policy normalization. The monetary policy statement that states the ECB will maintain stimulus ‘well past’ the asset purchase program is now being inferred by investors as several quarters rather than years.

This week will see releases for retail sales from both Canada and the U.S. as well as inflation data in Canada on Friday.  Canadian headline CPI is expected to be 2.3% y/y in April, while consensus for core inflation should run around the 2% range.  On Friday, volumes were still robust to end a busy week that included strong issuance and corporate earnings headlines that drove spreads. Strong buying of deposit notes from both international and domestic accounts tightened spreads 1-2bps, while the lower volatility has been positive for NVCC bonds as well.  Also, pressure on Enbridge and TransCanada hybrid spreads continue to dissipate.  Overall, Canadian corporate credit spreads ended the day unchanged.

Equity Markets:

 

  Index Level % Change QTD YTD Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018
S&P 500 2,727.72 0.17% 3.51% 2.72% 3.82% 6.07% 3.09% 4.48% 6.64% -0.76%
TSX

15,983.32

0.15%

4.28%

-0.44%

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

2.230%

0.00% 0.26% 0.36% 1.150% 1.119% 1.393% 1.753% 1.866% 1.969%
Canada 10 Year 2.404% 0.01% 0.31% 0.36% 1.750% 1.625% 1.762% 2.099% 2.045% 2.091%
Canada 30 Year 2.429% 0.00% 0.20% 0.16% 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

3.669%

0.00% 0.20% 0.19% 3.740% 3.632% 3.358% 3.712% 3.476% 3.468%
US 10 Year 2.981% 0.01% 0.24% 0.57% 2.50% 2.39% 2.31% 2.33% 2.41% 2.74%
CDX IG 59.042 -0.252                

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.