The Canadian dollar strengthened...

Posted: Wednesday, September 12, 2018 - 09:09 EDT

The Canadian dollar strengthened by approximately half a cent against the U.S. dollar yesterday afternoon after reports that Canada and the U.S. were making progress in the ongoing NAFTA negotiations.  Canadian Minister Freeland indicated that there appears to be goodwill on both sides, while Prime Minister Trudeau speaking in Winnipeg noted that there is a good NAFTA deal to be had between the countries.  President Trump reiterated Trudeau’s remarks saying that a trade deal with Canada is coming along very well.  These statements followed a report that Canada will make concessions related to dairy, giving the U.S. limited access to the Canadian dairy market.  There is speculation that Canada expects the U.S. to offer similar allowances related to the Chapter 19 dispute resolution mechanism in exchange.  Although Minister Freeland declined to say when the next meeting is with Lighthizer, she believes that a NAFTA deal is still possible.

The new issuance Canadian corporate credit market was active once again yesterday with Nissan Canada pricing a $500mil 3-year bond at +98bps over the curve.  Aroundtown followed suit, after proactively marketing in Canada over the past year, issuing $250mil 7-year bonds at +240bps over the curve that brought out 19 buyers.  Last off, BCE reopened its long bond in the U.S. that raised an additional $400mil.  On a swapped back basis, the long U.S. BCE bonds priced at +186bps, but despite the equivalent Canadian dollar bonds trading at wider spreads, the new issue in the U.S. did not move Canadian BCE spreads tighter.  In the secondary market, flows were focused around the new issues although there was very little selling against the new deals.  As a result, 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 2,887.89 0.37% 6.66% 9.48% 6.07% 3.09% 4.48% 6.64% -0.76% 3.43%
TSX

16,094.25

0.23%

-0.67%

1.26%

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

2.25%

0.04% 0.18% 0.38% 1.12% 1.39% 1.75% 1.87% 1.97% 2.07%
Canada 10 Year 2.33% 0.04% 0.16% 0.28% 1.63% 1.76% 2.10% 2.05% 2.09% 2.17%
Canada 30 Year 2.35% 0.04% 0.14% 0.08% 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

3.63%

0.04% 0.18% 0.12% 3.63% 3.36% 3.71% 3.48% 3.47% 3.45%
US 10 Year 2.97% -0.01% 0.11% 0.56% 2.39% 2.31% 2.33% 2.41% 2.74% 2.86%
CDX IG 57.792 -0.281                

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.