This morning the tone is positive following a report...

Posted: Thursday, July 5, 2018 - 09:14 EDT

This morning, the tone is positive following a report that the U.S. Ambassador to Germany has been asked to come to an arrangement with several countries in the European Union around auto tariffs.  It is expected that the U.S. could effectively support lowering these taxes to zero.  As a result, European equity markets are up over a percent, while WTI crude prices remain at the highest levels in almost four years.  Home sales data was released this morning for the Greater Toronto Area that showed stabilization in the real estate market.  Sales in June increased by 2.4% on a year over year basis with a surprisingly strong 18% increase from last month.  In April of last year, home sales increased to its highest levels in the Toronto region that subsequently cooled as a result of the foreign buyers’ tax and new OSFI B-20 rules that were implemented.  It appears that buyers are again looking to purchase  homes after several months of declines.  The condo market continues to show strength, leading growth of 7.5% over the past year.

The Canadian corporate credit market was mostly quiet as a result of the U.S. holiday.  Most notably was Enbridge Inc.’s announcement late yesterday morning that it would sell its Canadian natural gas gathering and processing assets to Brookfield Infrastructure.  The deal would sum to an enterprise value of $4.31bil.  Although specific assets were not disclosed in the release, Enbridge’s current portfolio consists of 19 gas processing facilities along with over 3,500km of gathering pipelines.  Enbridge previously announced its intention to sell these assets, although the confirmation of the transaction will reduce strain on funding requirements for its Line 3 Replacement project.  Enbridge initially indicated asset sales of $3bil this year with the company now completing $7.5bil of sales including this announcement.  Enbridge Inc. bonds were approximately 2-3bps tighter.  Outside of Enbridge, spreads were mostly unchanged as a result of the limited volume.

Equity Markets:

 

  Index Level % Change QTD YTD Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
S&P 500 2,713.22 -0.49% -0.19% 2.46% 6.07% 3.09% 4.48% 6.64% -0.76% 3.43%
TSX

16,304.72

0.26%

0.17%

2.11%

2.41% -1.64% 3.68% 4.44% -4.52% 6.77%

Rates:

 

Today

% Change

QTD change

YTD change

Q1 2017

Q2 2017

Q3 2017

Q4 2017

Q1 2018

Q2 2018

Canada 5 Year

2.073%

0.03% 0.01% 0.21% 1.119% 1.393% 1.753% 1.866% 1.969% 2.068%
Canada 10 Year 2.168% 0.03% 0.00% 0.12% 1.625% 1.762% 2.099% 2.045% 2.091% 2.168%
Canada 30 Year 2.209% 0.03% 0.00% -0.06% 2.302% 2.148% 2.472% 2.266% 2.228% 2.205%
30yr Generic Corporate A rated Spread 1.280% 0.04% 0.04% 0.04% 1.330% 1.21% 1.240% 1.210% 1.240% 1.240%
30yr All-in Corporate A rated Yield

3.489%

0.07% 0.04% -0.02% 3.632% 3.358% 3.712% 3.476% 3.468% 3.445%
US 10 Year 2.858% 0.03% 0.00% 0.45% 2.39% 2.31% 2.33% 2.41% 2.74% 2.86%
CDX IG 66.439 -0.912                

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.