Voters head to the polls in the U.S.

Posted: Tuesday, November 6, 2018 - 08:53 EST

Voters head to the polls in the U.S. for the midterm elections that could see a shift of power in government.  The divide within the U.S. has brought out voters in masses with early voting breaking records in multiple states so far.  Current polls suggest that the Democrats will take control of congress while the Republicans will maintain power within the senate.  The segregation of power between the house and senate would potentially lead to a stalemate for the remaining two years of President Trump’s term. 

The uncertainty surrounding the election is leading to a cautious tone this morning with European equity markets lower to start, and U.S. equity futures also pointing towards a negative open.  The long end of the Treasury curve is approximately 1bps lower with the U.S. dollar strengthening against the Canadian dollar.  Otherwise, the pending talks between the U.S. and China regarding trade still hang in the background with the Chinese Vice President noting that China is ready to discuss a solution with the U.S., though they will not be bullied.  So far, the U.S. has announced approximately $250bil in tariffs on Chinese goods, while the Chinese enacted tax on $110bil of goods.  The U.S. has threatened an additional $250bil of goods, although the tough stance by the Chinese would probably look to match the U.S.

The new issue Canadian corporate credit market was active again given the calmness in the market yesterday.  As expected, Transurban Finance issued its second Canadian dollar debt that raised $650mil 10-year bonds at +202bps over the curve.  The GM ABS deal announced late last week also priced yesterday raising $327mil across five tranches.  The three senior tranches, that had a weighted average life between 0.44yrs and 2yrs, priced spreads between 55bps-95bps over the curve.  The secondary market did see modest activity with flows still biased towards selling.  To end the day, corporate credit spreads were mostly unchanged.

Equity Markets:

 

  Index Level % Change QTD YTD Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018
S&P 500 2,738.31 0.56% -5.91% 4.03% 3.09% 4.48% 6.64% -0.76% 3.43% 7.71%
TSX

15,217.70

0.65%

-5.09%

-3.79%

-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

2.43%

-0.01% 0.09% 0.57% 1.39% 1.75% 1.87% 1.97% 2.07% 2.34%
Canada 10 Year 2.52% -0.02% 0.09% 0.47% 1.76% 2.10% 2.05% 2.09% 2.17% 2.43%
Canada 30 Year 2.55% -0.03% 0.12% 0.28% 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

3.85%

-0.01% 0.12% 0.30% 3.36% 3.71% 3.48% 3.47% 3.45% 3.72%
US 10 Year 3.19% -0.01% 0.13% 0.79% 2.31% 2.33% 2.41% 2.74% 2.86% 3.06%
CDX IG 65.423 0.283                

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.