Canada released its employment data this morning

Posted: Friday, June 8, 2018 - 09:05 EDT

Canada released its employment data this morning that saw a decline of 7.5k jobs in the month of May.  This was well below expectations for an increase of 23.5k.  All the jobs lost were full time, which was lower by 31k, offset by an increase of 23.6k part time jobs.  The unemployment rate was stable at 5.8% as the participation rate ticked down by 0.1% to 65.3%.  Wages, however, increased at the strongest pace since 2009 registering at 3.9% increase year over year in hourly earnings.  The surge in wages could be an indicator for the Bank of Canada that employment is nearing full capacity in spite of the job declines this past month.

The PC party won the majority of seats in last night’s Ontario provincial election with 76 seats, followed by the official opposition NDP party with 40 seats.  As PC leader Ford forms a government, he has pledged to cut corporate as well as personal income taxes.  Since the PC party has yet to release a finalized platform that costs out the projected deficit, there is some weakness on provincial spreads this morning as a result of the uncertainty. 

Telus issued its inaugural U.S. dollar denominated debt yesterday, following the lead of BCE a couple months back.  Telus took advantage of lower funding costs south of the border pricing $750mil 30-year bonds at +160bps over the curve.  On a swapped back basis to the Canadian dollar, the cost of debt was equivalent to just around 200bps over the curve and represented a 25bps lower yield than secondary Telus bonds prior to the deal.  Telus funding at tighter levels in the U.S. was positive for their Canadian dollar spreads.  In the secondary market, volumes were active across various sectors including other cable/telco names, deposit notes and midstream.  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 2,770.37 -0.07% 5.32% 4.52% 3.82% 6.07% 3.09% 4.48% 6.64% -0.76%
TSX

16,192.78

0.05%

5.92%

1.14%

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%

-0.03% 0.17% 0.27% 1.150% 1.119% 1.393% 1.753% 1.866% 1.969%
Canada 10 Year 2.288% -0.02% 0.20% 0.24% 1.750% 1.625% 1.762% 2.099% 2.045% 2.091%
Canada 30 Year 2.340% -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

3.580%

-0.02% 0.11% 0.10% 3.740% 3.632% 3.358% 3.712% 3.476% 3.468%
US 10 Year 2.910% -0.01% 0.17% 0.50% 2.50% 2.39% 2.31% 2.33% 2.41% 2.74%
CDX IG 66.799 0.020                

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.