The Bank of England, as expected, raised the bank rate by 25bps this morning

Posted: Thursday, August 2, 2018 - 09:28 EDT

The Bank of England, as expected, raised the Bank Rate by 25bps this morning which currently stands at 0.75%.  Inflation in the UK has been steadily building and stood at 2.4% in June.  Core CPI has also hovering around the 2% mark over the past year.  Much of the inflation has been driven by a falling currency in the country that has increased import costs as well as rising energy prices.  Many expected that Governor Carney would raise rates last month although the slowdown in first quarter growth did prove to be temporary with second quarter GDP expected to rebound to approximately 1.4%.  Although the BOE did cut its global growth forecast, its projections remained the same for the UK region averaging growth around 1.75% per year through until 2020.  Brexit remains the most topical concern related to the British economy as much uncertainty still remains around negotiated terms with the European Union.  The Fed also released its monetary policy decision yesterday that left rates unchanged.  The tone of the statement remained mostly the same with U.S. economic growth remaining strong and core inflation near the 2% mark.  The Fed repeated its stance that monetary policy conditions will continue to be accommodative although it expects further gradual rate increases.

BCE reported earnings this morning that displayed strong wireless growth of +122k post-paid net additions.  However, given the stronger promotional period, churn did not improve as much as expected while ARPU remained mostly flat on a year over year basis.  The wireline segment showed positive momentum in its IPTV adds this quarter, while internet subscribers were also positive at +10k.  Leverage remained mostly stable at 2.7x during the quarter.  The Canadian corporate credit market was relatively quiet leading up to the long weekend in Canada.  However, rates in Canada and the U.S. continue to grind higher after positive economic data from both countries.  10-year Canada yields have moved approximately 25bps higher from their lows in June to 2.36% while U.S. 10-year Treasuries are again hovering around the 3% mark.  Spreads remained mostly stable and were unchanged to end the day.

Equity Markets:


  Index Level % Change QTD YTD Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
S&P 500 2,813.36 -0.10% 3.61% 6.36% 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


0.03% 0.18% 0.39% 1.12% 1.39% 1.75% 1.87% 1.97% 2.07%
Canada 10 Year 2.36% 0.05% 0.20% 0.32% 1.63% 1.76% 2.10% 2.05% 2.09% 2.17%
Canada 30 Year 2.38% 0.05% 0.17% 0.11% 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


0.05% 0.21% 0.15% 3.63% 3.36% 3.71% 3.48% 3.47% 3.45%
US 10 Year 2.97% -0.03% 0.11% 0.57% 2.39% 2.31% 2.33% 2.41% 2.74% 2.86%
CDX IG 59.707 1.144                

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.