As NAFTA negotiations continue...

Posted: Tuesday, August 7, 2018 - 09:41 EDT

As NAFTA negotiations continue, Canadian foreign affairs minister Freeland indicated over the weekend that Canada is looking to move forward towards an agreement with the U.S. and Mexico. Despite reports earlier in the week that Canada had not been invited to the negotiation table by the other two countries, U.S. trade representative Lighthizer continues to indicate that he would like to have an agreement in principal in the next month.  Overall, Freeland reiterated that NAFTA should be a trilateral agreement and that Canada is not looking for a bilateral contract.  This week, the economic calendar in Canada will be focused on employment data on Friday with expectations for an increase of 19k jobs in July.  The unemployment rate should remain around the 6% range with wage growth around 3.6%.  The U.S. will also release CPI data on Friday for July that should see headline inflation increased by 0.2% in over the month.  Inflation continues to remain above the two percent target, with year over year inflation expected to increase by 2.9% and core CPI at 2.3%.

The Canadian corporate credit market was quiet on Friday as a result of the early close leading up to the long weekend.  The positive tone in the market continued to be supportive of credit spreads as the new supply market has also been quiet.  Ford Motor Credit issued an FRN and two bullet bonds in the U.S. yesterday for a total of $2.25bil in funding, which is pressuring Ford Credit Canada spreads this morning.  Otherwise, spreads were mostly unchanged to end Friday as a result of the holiday weekend.

Equity Markets:

 

  Index Level % Change QTD YTD Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
S&P 500 2,850.40 0.35% 5.01% 7.79% 6.07% 3.09% 4.48% 6.64% -0.76% 3.43%
TSX

16,420.24

0.07%

1.07%

3.03%

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

2.27%

0.01% 0.20% 0.40% 1.12% 1.39% 1.75% 1.87% 1.97% 2.07%
Canada 10 Year 2.36% 0.01% 0.19% 0.32% 1.63% 1.76% 2.10% 2.05% 2.09% 2.17%
Canada 30 Year 2.38% 0.01% 0.17% 0.11% 2.30% 2.15% 2.47% 2.27% 2.23% 2.21%
30yr Generic Corporate A rated Spread 1.28% 0.00% 0.04% 0.04% 1.33% 1.21% 1.24% 1.21% 1.24% 1.24%
30yr All-in Corporate A rated Yield

3.66%

0.01% 0.21% 0.15% 3.63% 3.36% 3.71% 3.48% 3.47% 3.45%
US 10 Year 2.95% 0.01% 0.09% 0.54% 2.39% 2.31% 2.33% 2.41% 2.74% 2.86%
CDX IG 58.693 0.114                

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.