Fed Chair Powell spoke yesterday afternoon...

Posted: Thursday, October 4, 2018 - 09:27 EDT

Fed Chair Powell spoke yesterday afternoon and indicated that the FOMC may eventually increase interest rates to a point where economic growth will become constrained.  However, he still believes that this is still some ways away.  At this juncture, rates are still extremely accommodative and Powell notes that interest rates will gradually move back to neutral.  The view on the economy remains upbeat with prospects for sustained expansion and low unemployment. 

The recently negotiated USMCA agreement between the U.S., Canada and Mexico also pushed rates higher yesterday.  The 10-year Canada yield ended the day 9bps higher and is now at a level last seen in 2014. The 10-year Treasury yields also increased by 12bps yesterday with 2011 being the last time yields were in this range.  This morning rates in both Canada and the U.S continue to grind higher.

The Canadian corporate credit market remained active yesterday despite no new issuance.  Financial bonds remained in focus following the U.S. dollar debt issued by BMO.  As a result, flows resulted across the bank capital structure including the recently issued RBC bail-in senior bonds.  In the primary market, there continues to be issuers marketing their roadshows including Enercare’s  update to fixed income investors this morning following the acquisition by Brookfield Infrastructure.  To end the day, spreads closed mostly unchanged.

Equity Markets:

 

  Index Level % Change QTD YTD Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018
S&P 500 2,925.51 0.07% 0.40% 11.01% 3.09% 4.48% 6.64% -0.76% 3.43% 7.71%
TSX

16,072.05

0.34%

0.04%

1.40%

-1.64% 3.68% 4.44% -4.52% 6.77% -0.56%

Rates:

 

Today

% Change

QTD change

YTD change

Q2 2017

Q3 2017

Q4 2017

Q1 2018

Q2 2018

Q3 2018

Canada 5 Year

2.45%

0.06% 0.11% 0.58% 1.39% 1.75% 1.87% 1.97% 2.07% 2.34%
Canada 10 Year 2.55% 0.09% 0.12% 0.51% 1.76% 2.10% 2.05% 2.09% 2.17% 2.43%
Canada 30 Year 2.54% 0.09% 0.12% 0.27% 2.15% 2.47% 2.27% 2.23% 2.21% 2.42%
30yr Generic Corporate A rated Spread 1.30% 0.02% 0.00% 0.02% 1.21% 1.24% 1.21% 1.24% 1.28% 1.30%
30yr All-in Corporate A rated Yield

3.84%

0.11% 0.12% 0.29% 3.36% 3.71% 3.48% 3.47% 3.45% 3.72%
US 10 Year 3.22% 0.03% 0.15% 0.81% 2.31% 2.33% 2.41% 2.74% 2.86% 3.06%
CDX IG 60.121 0.854                

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.