The FOMC released its monetary policy statement yesterday afternoon...

Posted: Friday, November 9, 2018 - 10:22 EST

The FOMC released its monetary policy statement yesterday afternoon, leaving the rates unchanged.  The Fed acknowledged that labour markets and economic activity continue to strengthen. The low unemployment rate has been supportive for household spending, although the pace of business fixed investment has moderated from earlier this year. Most of the remaining statement was left unchanged, as the central bank will remain focused on economic data to determine the timing and size of future adjustments to the target fed funds rate. The market continues to price in a larger probability of a hike at the December meeting, with current implied probabilities at 74%. This morning, producer price data in the U.S. was released for October that increased by 0.6%, beating expectations of 0.2%. On a year over year basis, PPI final demand is growing at 2.9%. This month’s reading is the strongest increase since 2012, which indicates that businesses are seeing potential price inflation pressures. Some of these pricing pressures are related to trade wars and new tariffs enacted against China. Stripping out food, energy and trade, core PPI is still advancing at a rate of 0.2% in October and 2.8% on a yearly basis.
 
The Canadian corporate credit market was softer yesterday, as the euphoria following the U.S. midterm elections have faded. WTI crude prices continue to decline and now sit below $60/barrel, after moving above $75/barrel a month ago. Canadian oil remains pressured as well after a judge in Montana effectively blocked the Presidential Permit to build the TransCanada Keystone XL pipeline that would facilitate exporting oil outside of Canada. This roadblock could further delay the project that was slated to be in service in 2021. In secondary corporate credit market, flows remained light although the weakness in the market led to spreads widening by approximately 1bps.

Equity Markets:

 

  Index Level % Change QTD YTD Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018
S&P 500 2,806.83 -0.25% -3.49% 6.70% 3.09% 4.48% 6.64% -0.76% 3.43% 7.71%
TSX

15,357.47

-0.08%

-4.21%

-2.91%

-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

2.46%

0.00% 0.12% 0.59% 1.39% 1.75% 1.87% 1.97% 2.07% 2.34%
Canada 10 Year 2.54% 0.00% 0.11% 0.49% 1.76% 2.10% 2.05% 2.09% 2.17% 2.43%
Canada 30 Year 2.56% 0.00% 0.13% 0.29% 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

3.86%

0.02% 0.13% 0.31% 3.36% 3.71% 3.48% 3.47% 3.45% 3.72%
US 10 Year 3.21% -0.03% 0.15% 0.80% 2.31% 2.33% 2.41% 2.74% 2.86% 3.06%
CDX IG 64.743 1.195                

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.