Optimism regarding trade negotiations continues this morning

Posted: Wednesday, December 12, 2018 - 09:42 EST

Optimism regarding trade negotiations continues this morning. Global stocks rallied after President Trump’s tweet “about very productive conversations going on with China!”. Trade news overshadowed the UK political turmoil. Theresa May will face a vote of confidence in her leadership of the Conservative Party today. She needs more than 50%+1 vote which is 158 votes to stay in power. According to Bloomberg, more than 100 Tory MPs have publicly expressed their support.

Enbridge Inc. hosted their annual investor day in New York yesterday. In 2018, the company has made significant progress to simplify their corporate structure, remove debt structure subordination, monetize non-core assets and de-leverage through EBITDA growth. S&P requires < 5x leverage for ENBCN, to remain in BBB+ rating.  Currently, their leverage ratio is at 4.8x and it will reach 4.5x in 2020, given their current projects backlog.  Moody’s placed ENBCN’s Baa3 rating on a more positive outlook in November, to “review for upgrade” yesterday. It also indicated the potential for a multi-notch upgrade. If Moody’s upgrades ENBCN from Baa3 to Baa1, it will be rated BBB+ under bond index rating methodology, and ENBCN hybrids will be rated BBB- instead of high yield. Currently ENBCN hybrids are trading 50 bps back of TRPCN hybrid, which are rated BBB.

Equity Markets:

 

  Index Level % Change QTD YTD Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018
S&P 500 2,636.78 -0.04% -9.13% 0.47% 3.09% 4.48% 6.64% -0.76% 3.43% 7.71%
TSX

14,667.83

-0.41%

-8.21%

-6.96%

-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

2.05%

0.05% -0.29% 0.19% 1.39% 1.75% 1.87% 1.97% 2.07% 2.34%
Canada 10 Year 2.10% 0.05% -0.32% 0.06% 1.76% 2.10% 2.05% 2.09% 2.17% 2.43%
Canada 30 Year 2.26% 0.05% -0.16% 0.00% 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

3.56%

0.07% -0.16% 0.02% 3.36% 3.71% 3.48% 3.47% 3.45% 3.72%
US 10 Year 2.90% 0.02% -0.16% 0.49% 2.31% 2.33% 2.41% 2.74% 2.86% 3.06%
CDX IG 77.450 -2.646                

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.