U.S. Producer Price Index for September increased at expectations...

Posted: Wednesday, October 10, 2018 - 09:35 EDT

U.S. Producer Price Index for September increased at expectations of +0.2%.  On a year over year basis, PPI demand increased by 2.6%, which declined from the previous month of 2.8%.  The increase in September was driven by transportation and airline passenger services that reported highs last seen back in 2009. The continued increase in PPI should continue to keep headline inflation at elevated levels, with CPI on a year over year basis reported at 2.7% in August. Excluding more volatile items such as food and energy, core PPI increased by 0.2% from the previous month to 2.5%. Recent trade war escalation between the U.S. and other nations has further pushed inflation pressures higher.  Yesterday, both Canada and U.S. government rates moved a couple of basis points lower after yields continued to track higher since the beginning of September.  In the background, there are still fears that the U.S. and China trade relations will continue to worsen.

The Canadian corporate credit market was calm yesterday despite the risk-off sentiment in equity markets.  There continued to be profit takers in deposit notes as spreads have remained on the tighter end of the range since the announcement of bail-in. Outside of secondary markets, there are still several deals that could come to market over the next week that includes the Daimler ABS, Clover P3 and Enercare/Brookfield Infrastructure. Spreads ended the day mostly unchanged with less active flows following the holiday long weekend in Canada.

Equity Markets:

 

  Index Level % Change QTD YTD Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018
S&P 500 2,880.34 -0.14% -1.10% 9.35% 3.09% 4.48% 6.64% -0.76% 3.43% 7.71%
TSX

15,854.05

-0.58%

-1.26%

0.08%

-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

2.48%

0.00% 0.14% 0.62% 1.39% 1.75% 1.87% 1.97% 2.07% 2.34%
Canada 10 Year 2.60% 0.00% 0.18% 0.56% 1.76% 2.10% 2.05% 2.09% 2.17% 2.43%
Canada 30 Year 2.59% 0.00% 0.17% 0.32% 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

3.89%

0.02% 0.17% 0.34% 3.36% 3.71% 3.48% 3.47% 3.45% 3.72%
US 10 Year 3.23% 0.02% 0.16% 0.82% 2.31% 2.33% 2.41% 2.74% 2.86% 3.06%
CDX IG 62.111 0.442                

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.