The Chief Economist for the ECB spoke this morning...

Posted: Wednesday, June 6, 2018 - 09:07 EDT

The Chief Economist for the ECB spoke this morning and indicated that the upcoming ECB meeting next week will be critical.  The central bank is expected to use the policy meeting to reach a decision on when the bond-buying program will end.  An assessment will be made on whether progress in the Euro-area economy has been sufficient to warrant a gradual unwinding of the net asset purchase program.  Further sizable expansions in quantitative easing are waning as the ECB had previously announced that the bond purchase program of 30 billion euros per month will continue until at least September.  The speech this morning has led to a rise in bond yield across Europe, with 10-year yields increasing approximately 6-9bps in various countries.  The tone remains positive this morning despite unnerving comments from the new Italian Prime Minister.  The potential for the ECB to end its bond buying program could affect highly indebted Italy’s ability to fund future spending programs.  The Five-Star Movement-League coalition plans to enact more drastic plans, that include more spending.

The Nouvelle Autoroute 30 P3 deal completed pricing yesterday which led to some small selling of bonds to fund the deal.  With the strong demand for the deal, the P3 project continued to tighten several basis points in the secondary market.  Investors will also be watching out for Ontario bonds leading up to the provincial election tomorrow.  With several of the candidate’s platforms expected to increase the provincial deficit by approximately $10 billion, Ontario bonds will continue to exhibit some overhang until the results of the election are finalized.  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 2,748.80 0.07% 4.47% 3.68% 3.82% 6.07% 3.09% 4.48% 6.64% -0.76%
TSX

16,122.25

0.44%

5.42%

0.66%

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

2.168%

0.02% 0.20% 0.30% 1.150% 1.119% 1.393% 1.753% 1.866% 1.969%
Canada 10 Year 2.305% 0.03% 0.21% 0.26% 1.750% 1.625% 1.762% 2.099% 2.045% 2.091%
Canada 30 Year 2.348% 0.03% 0.12% 0.08% 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

3.588%

0.03% 0.12% 0.11% 3.740% 3.632% 3.358% 3.712% 3.476% 3.468%
US 10 Year 2.953% 0.03% 0.21% 0.55% 2.50% 2.39% 2.31% 2.33% 2.41% 2.74%
CDX IG 64.729 0.560                

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.