Trade tensions between the U.S. and China have been overshadowed...

Posted: Tuesday, July 10, 2018 - 09:54 EDT

The positive tone in the markets is carrying over from yesterday, with most European equity indices higher this morning.  Trade tensions between the U.S. and China have been overshadowed by the strong employment numbers last Friday, while investors are looking past the potential fallout in the U.K. parliament.  U.K. Prime Minister May could lose control of her government after three of her ministers resigned, as a result of disagreements with her Brexit plan.  At this point, PM May remains in power, but the lack of a majority government could see her ousted if her own party does not come to a universal agreement.  In Canada, tomorrow’s Bank of Canada decision will remain in focus, with the expectation for a rate increase moving higher to 94%.  Higher energy prices have been positive for the Canadian economy, although uncertainties surrounding trade could still give reason for the central bank to hold interest rates.

Leading up to the Bank of Canada announcements, issuers decided to squeeze out several more deals prior to tomorrow’s decision.  CIBC led off the morning with a $1.5bil 5-year deposit note that priced at 88bps over the curve with 70 buyers in the deal and books over 2.3bil.  Toyota Credit Canada followed up with a $400mil 5-year bond at +95bps over curve.  The Toyota deal had 46 buyers and fills in the 10-15% range.  Late in the afternoon, IGM Financial announced a $200mil 30-year bond at +195bps over the curve that saw 18 buyers and fills around 40-50%.  The stronger tone in the market helped to absorb most of the new issue supply although there was some typical selling against the new deals.  At the end of the day, spreads ended the day mostly unchanged.

Equity Markets:

 

  Index Level % Change QTD YTD Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
S&P 500 2,784.17 0.88% 2.49% 5.20% 6.07% 3.09% 4.48% 6.64% -0.76% 3.43%
TSX

16,452.34

0.49%

1.13%

3.10%

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

2.085%

0.03% 0.02% 0.22% 1.119% 1.393% 1.753% 1.866% 1.969% 2.068%
Canada 10 Year 2.171% 0.04% 0.00% 0.13% 1.625% 1.762% 2.099% 2.045% 2.091% 2.168%
Canada 30 Year 2.220% 0.05% 0.02% -0.05% 2.302% 2.148% 2.472% 2.266% 2.228% 2.205%
30yr Generic Corporate A rated Spread 1.280% 0.00% 0.04% 0.04% 1.330% 1.21% 1.240% 1.210% 1.240% 1.240%
30yr All-in Corporate A rated Yield

3.500%

0.05% 0.06% -0.01% 3.632% 3.358% 3.712% 3.476% 3.468% 3.445%
US 10 Year 2.866% 0.01% 0.01% 0.46% 2.39% 2.31% 2.33% 2.41% 2.74% 2.86%
CDX IG 62.304 0.148                

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.