Trade tariffs are back in the headlines this morning...

Posted: Wednesday, July 11, 2018 - 09:52 EDT

Trade tariffs are back in the headlines this morning, after the U.S. announced it will be taxing an additional $200 billion of Chinese goods at the rate of 10%.  The list of targeted items will become official on August 30th if an agreement between the two countries is not made.  This will be in addition to the previously imposed tariffs on $50 billion of Chinese imports.  The Chinese Commerce Ministry described the tariffs as completely unacceptable, and stated that China will not yield to threats or bullying tactics.  Previously, China matched the U.S. by imposing tariffs on approximately $50 billion of U.S. imported goods, although it is not yet known if President Xi will look to do the same in response to the newest tariffs.  In the interim, China plans to make a complaint with the World Trade Organization against the U.S.  Sentiment has turned negative this morning, as a result of the trade dispute, with European equity markets lower by over 1% and a flight to safety moving the U.S. dollar higher.

The Canadian market will be watching the Bank of Canada (“BoC”) which will release its monetary policy statement this morning, followed by a press conference by Governor Poloz.  Markets continue to price in a 99.9% probability the Bank will raise interest rates at this meeting.  More importantly, the tone and rhetoric of the statement will be important to gauge likely future actions by the BoC.  .  The reinitiating of global trade war concerns could play a factor in future rate hike decisions.

In the Canadian corporate credit market, two deals priced yesterday following strong issuance on Monday.  John Deere Canada Funding issued $200mil 5-year notes at +92bps over the curve with Eagle Credit Card Trust launching its first securitized credit card funding program this year.  The Eagle CCT priced three tranches at +95bps, +147bps and +222bps over the curve for a total of $250 million that saw approximately 30 buyers and fills in the 10% range.  Additional supply yesterday biased market participants towards selling, and as a result, spreads closed the day 1bps wider.

Equity Markets:


  Index Level % Change QTD YTD Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
S&P 500 2,793.84 0.35% 2.84% 5.57% 6.07% 3.09% 4.48% 6.64% -0.76% 3.43%





2.41% -1.64% 3.68% 4.44% -4.52% 6.77%




% Change

QTD change

YTD change

Q1 2017

Q2 2017

Q3 2017

Q4 2017

Q1 2018

Q2 2018

Canada 5 Year


-0.01% 0.01% 0.21% 1.119% 1.393% 1.753% 1.866% 1.969% 2.068%
Canada 10 Year 2.163% -0.01% -0.01% 0.12% 1.625% 1.762% 2.099% 2.045% 2.091% 2.168%
Canada 30 Year 2.209% -0.01% 0.00% -0.06% 2.302% 2.148% 2.472% 2.266% 2.228% 2.205%
30yr Generic Corporate A rated Spread 1.280% 0.00% 0.04% 0.04% 1.330% 1.210% 1.240% 1.210% 1.240% 1.240%
30yr All-in Corporate A rated Yield


-0.01% 0.04% -0.02% 3.632% 3.358% 3.712% 3.476% 3.468% 3.445%
US 10 Year 2.844% -0.01% -0.02% 0.44% 2.39% 2.31% 2.33% 2.41% 2.74% 2.86%
CDX IG 62.573 0.279                

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.