The tone this morning remains negative

Posted: Tuesday, November 20, 2018 - 08:44 EST

The tone this morning remains negative following a sell-off yesterday in equity markets.  The TSX was lower by 0.56% while the S&P500 declined by 1.66%.  The technology sector remains the weakest, as a result of worries for slower global growth and companies revising guidance lower for 2019.  The Nasdaq Index dropped by over 3% yesterday with futures pointing towards a lower open this morning. 

Bank of England Governor Carney is currently testifying to the U.K. parliament and warned of the threats related to leaving the EU without a plan to facilitate a smooth transition.  As a result, he indicated his support for the Brexit proposal put forth by Prime Minister May last week.  If possible, Carney would like to see the transition arrangements in the withdrawal agreement extended that will allow for the economy and financial sector to adapt.  In the near-term, the BOE expects the volatility to remain over the next month at least with news headlines driving sterling in both directions.  The Bank of Canada also has two speakers today – Deputy Governor Wilkins and Lane – with hopes for more clarity into the BOC’s view on current oil prices and effects on growth projections moving forward.

Similar to equity markets, the Canadian corporate credit market also displayed signs of weakness yesterday.  Spread widening was led by Nissan, which was out by approximately 10bps, as a result of the company’s chairman being arrested for allegedly misreporting income and misuse of company assets.  Despite the tone, CU Inc. decided to tap the new issue market pricing a $385mil long bond at +152bps over the curve.  The deal brought out 29 buyers with late fills in the 10% range.  Sustained volatility kept investors on the sidelines with any flows skewed towards selling.  To end the day, spreads widened by approximately 2-4bps.

Equity Markets:

 

  Index Level % Change QTD YTD Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018
S&P 500 2,690.73 -1.66% -7.40% 2.38% 3.09% 4.48% 6.64% -0.76% 3.43% 7.71%
TSX

15,071.01

-0.56%

-5.90%

-4.61%

-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

2.27%

-0.03% -0.07% 0.40% 1.39% 1.75% 1.87% 1.97% 2.07% 2.34%
Canada 10 Year 2.34% -0.02% -0.09% 0.30% 1.76% 2.10% 2.05% 2.09% 2.17% 2.43%
Canada 30 Year 2.41% -0.01% -0.02% 0.14% 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

3.71%

0.01% -0.02% 0.16% 3.36% 3.71% 3.48% 3.47% 3.45% 3.72%
US 10 Year 3.05% -0.01% -0.01% 0.64% 2.31% 2.33% 2.41% 2.74% 2.86% 3.06%
CDX IG 77.858 0.856                

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.