The Province of Ontario released its mid-year budget

Posted: Friday, November 16, 2018 - 09:30 EST

The Province of Ontario released its mid-year budget update with the deficit now projected at $14.5bil, which was revised marginally lower by $0.5bil.  The PC government indicated that it will continue to look for efficiencies to lower the deficit, to offset lower revenue, after the province decided to cancel the cap-and-trade program.  Ontario’s debt still remains high and is projected at 40.5% of net debt to GDP.  For 2018, the budget indicated that growth is expected to increase by 2.0%, with 2019-2021 GDP increase of 1.8%, 1.7% and 1.5%, respectively.  It is estimated that Ontario still requires approximately $3bil of borrowing needs for the year and may look to tap the market following the budget black-out. 

Brexit remained in the headlines for all of yesterday after a vote of non-confidence was put forward in the House that could challenge Prime Minister May’s leadership.  This morning, parliament continues to work on the Brexit bill and potentially through the weekend.

The Canadian corporate credit market remained softer yesterday reflecting the cautious tone in the market.  Capital Power wrapped up its investor call yesterday, although Algonquin Power plans to hold meetings next week on a potential hybrid issue, while AltaGas Canada is also hosting meetings to raise funding in the new entity.  In the secondary market, flows were again skewed towards selling with continued pressure on energy sector names, GE bonds and any issuers with U.K. exposure.  To end the day, corporate credit spreads were wider by 2-5bps.

Equity Markets:

 

  Index Level % Change QTD YTD Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018
S&P 500 2,730.20 1.06% -6.06% 3.87% 3.09% 4.48% 6.64% -0.76% 3.43% 7.71%
TSX

15,144.88

0.08%

-5.47%

-4.18%

-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

2.30%

-0.07% -0.04% 0.43% 1.39% 1.75% 1.87% 1.97% 2.07% 2.34%
Canada 10 Year 2.37% -0.07% -0.06% 0.32% 1.76% 2.10% 2.05% 2.09% 2.17% 2.43%
Canada 30 Year 2.43% -0.04% 0.01% 0.16% 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

3.73%

-0.02% 0.01% 0.18% 3.36% 3.71% 3.48% 3.47% 3.45% 3.72%
US 10 Year 3.11% 0.00% 0.05% 0.71% 2.31% 2.33% 2.41% 2.74% 2.86% 3.06%
CDX IG 76.533 3.315                

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.