U.K. Prime Minister May was able to survive a non-confidence vote

Posted: Thursday, December 13, 2018 - 09:19 EST

U.K. Prime Minister May was able to survive a non-confidence vote in parliament.  Despite the unsuccessful ousting of PM May, there are still members of parliament that are calling for her resignation.  Earlier this week, May delayed the Brexit vote in fear that the bill would not pass, however the deadline for a separation with the European Union still looms next year.  In Europe, the ECB released its monetary policy statement that made the decision to end its 2.6 trillion euro bond buying program this month.  After four years of unconventional quantitative easing, the ECB could embark on a tightening cycle starting next year.  Maturing debt will still be reinvested for an extended period of time, past the date the ECB plans to start increasing rates slated for next summer.  Ultimately, the central bank plans to be accommodative and will look to enhance its forward guidance related to bond reinvestment.

AltaGas announced its funding plan for next year that was largely positive for bondholders.  As anticipated, the company plans to sell assets next year in multiple phases that includes the 55% stake in the Northwest Hydro Facility netting $1.39bil along with targeted additional sales completed next year that will garner between $1.5-$2.0 billion.  AltaGas also announced a cut in the monthly dividend from $0.1825 to $0.08 per share which will also be positive for the credit.  Normalized EBITDA for fiscal year 2019 has been guided between $1.2-$1.3bil.  Yesterday, OSFI also increased its D-SIB buffer requirement from +1.5% to +1.75%, which is constructive for the big six banks in Canada.  Earlier this year, OSFI indicated that they reserve the right to adjust the domestic stability buffer given economic conditions.  The Canadian banks already hold a comfortable buffer above the newly required CET1 ratio of 9.75%.  The secondary Canadian corporate credit market continued to be positive yesterday with flows skewed towards better buying.  The rally in Western Canadian Select prices, coupled with strong momentum from the Enbridge investor day tightened spreads in the energy sector.  Higher beta pipeline hybrid bonds closed the day approximately 15-20bps tighter while the other corporate sector spreads were tighter by 3-5bps.

Equity Markets:


  Index Level % Change QTD YTD Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018
S&P 500 2,651.07 0.54% -8.64% 1.01% 3.09% 4.48% 6.64% -0.76% 3.43% 7.71%





-1.64% 3.68% 4.44% -4.52% 6.77% -0.56%




% Change

QTD change

YTD change

Q2 2017

Q3 2017

Q4 2017

Q1 2018

Q2 2018

Q3 2018

Canada 5 Year


0.03% -0.28% 0.20% 1.39% 1.75% 1.87% 1.97% 2.07% 2.34%
Canada 10 Year 2.11% 0.03% -0.31% 0.07% 1.76% 2.10% 2.05% 2.09% 2.17% 2.43%
Canada 30 Year 2.29% 0.06% -0.13% 0.02% 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


0.08% -0.13% 0.04% 3.36% 3.71% 3.48% 3.47% 3.45% 3.72%
US 10 Year 2.90% -0.01% -0.17% 0.49% 2.31% 2.33% 2.41% 2.74% 2.86% 3.06%
CDX IG 76.369 -1.544                

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.