There are reports that some progress, related to Brexit, has been made...

Posted: Thursday, November 1, 2018 - 09:01 EDT

This morning, there are reports that some progress, related to Brexit, has been made in regards to how British banks will be able to access the market after a deal is reached.  The agreement would be a reduction to the privileges that U.K. banks have currently, but would be a more palatable solution than disrupting the whole system.  However, banks in the region have already taken steps to setup trading desks in other European Union countries.  The BOE released its monetary policy statement that left the current benchmark rate unchanged at 0.75%.  The central bank will continue to hold its asset purchase program at 435 billion pounds as the output gap has closed from a more robust economy.  The expectation is for stronger GDP growth to continue until late 2019.  The BOE did address the current state of Brexit which remains one of the largest downside risks and would present a challenge for monetary policy.  The global economy has also become more uneven especially related to emerging markets and trade which present additional risks.  The Bank of England last hiked rates in August and, although timing of the next rate hike is unclear, rates are expected to move higher due to the healthier economy.

The Canadian corporate credit market stabilized to end the month, following the lead of equity markets that saw North American stock markets up around 1%.  Flows yesterday were focused on month end rebalancing although the tone was still skewed towards selling.   Investors will remain focused on earnings today.  BCE reported adjusted EBITDA that met expectations that saw strong wireless postpaid net adds in the quarter of 135k.  Wireline internet and video subscribers were also stronger in the quarter, that typically sees more seasonal increases due to students returning back to university.  BCE also confirmed the outlook for 2018 guidance with all metrics currently on track to meet expectations.  In the remaining corporate credit market, spreads ended the day mostly unchanged.

Equity Markets:

 

  Index Level % Change QTD YTD Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018
S&P 500 2,711.74 1.09% -6.83% 3.01% 3.09% 4.48% 6.64% -0.76% 3.43% 7.71%
TSX

15,027.28

0.89%

-6.27%

-5.00%

-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

2.44%

0.04% 0.10% 0.57% 1.39% 1.75% 1.87% 1.97% 2.07% 2.34%
Canada 10 Year 2.51% 0.05% 0.08% 0.46% 1.76% 2.10% 2.05% 2.09% 2.17% 2.43%
Canada 30 Year 2.54% 0.05% 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

3.84%

0.07% 0.12% 0.30% 3.36% 3.71% 3.48% 3.47% 3.45% 3.72%
US 10 Year 3.16% 0.02% 0.10% 0.76% 2.31% 2.33% 2.41% 2.74% 2.86% 3.06%
CDX IG 68.829 0.071                

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.