The BoE released its monetray policy statement...

Posted: Thursday, February 7, 2019 - 08:53 EST

The Bank of England released its monetary policy statement this morning that held the benchmark interest rate at 0.75% as well as the asset purchase plan at 435bil pounds.  However, the central bank revised growth expectations lower for this year and next.  The BOE GDP forecast for 2019 is now lower by 0.5% to 1.2% with 2020 projections cut by 0.2% to 1.5%.  Inflation is expected to fall temporarily below 2% in the coming months as energy costs have declined, although the weaker currency will lead to CPI hovering around 2% in the near term.  BOE Governor Carney is speaking during the press conference and noted that Brexit is still creating tensions, with the U.K. economy not currently prepared for a no-deal Brexit. The Brexit uncertainty has already hit the housing markets while consumer spending has been constrained, with no current Brexit transition in place to stem further growth reductions.  The ECB also published its economic forecast for the euro-area with economic indicators pointing to moderate growth to end 2018.  Short-term indicators still point to positive employment growth but 2019 growth forecasts have been cut from 1.9% to 1.3%.  Italy remains a concern for the ECB with GDP cut substantially from 1.2% to 0.2%.  In January, Draghi noted that risks in the EU are pointed to the downside and the ECB should be cautious about withdrawing stimulus this year.

BCE announced fourth quarter earnings this morning.  Wireless net adds in the quarter increased by 143K although churn ticked up by 9bps to 1.26%.  BCE announced its 2019 financial targets, that call for adjusted EBITDA growth in the 5%-7% range, free cash flow growth in the 7%-12% range and capital intensity around 16.5%.  Net leverage remained at 2.7x to end the quarter.  The Canadian corporate credit market took a breather from the continued spread tightening over the past month.  Flows were mostly two-way yesterday although tilted towards investor selling.  Spreads were approximately 2bps wider in secondary markets with a moderately risk-off tone to start the morning as a result of the revised growth estimates across Europe.

Equity Markets:

  Index Level % Change QTD YTD Q3 2017 Q4 2017 Q1 2018 Q2 2019 Q3 2019 Q4 2019
S&P 500 2,731.61 -0.22% 9.14% 9.14% 4.48% 6.64%

-0.76%

3.43% 7.71% -13.52%
TSX

15,712.31

0.06%

9.94%

9.94%

3.68% 4.44%

-4.52%

6.77% -0.56% -10.11%

Rates:

 

Today

% Change

QTD change

YTD change

Q3 2017

Q4 2017

Q1 2018

Q2 2018

Q3 2018

Q4 2018

Canada 5 Year

1.79%

-0.06% -0.10% -0.10% 1.75% 1.87% 1.97% 2.07% 2.34% 1.89%
Canada 10 Year 1.88% -0.06% -0.09% -0.09% 2.10% 2.05% 2.09% 2.17% 2.43% 1.97%
Canada 30 Year 2.15% -0.03% -0.04% -0.04% 2.47% 2.27% 2.23% 2.21% 2.42% 2.18%
30yr Generic Corporate A rated Spread 1.50% 0.00% 0.00% 0.00% 1.24% 1.21% 1.24% 1.28% 1.30% 1.50%
30yr All-in Corporate A rated Yield

3.65%

-0.03% -0.04% -0.04% 3.71% 3.48% 3.47% 3.45% 3.72% 3.68%
US 10 Year 2.67% -0.02% -0.01% -0.01% 2.33% 2.41% 2.74% 2.86% 3.06% 2.69%
CDX IG 67.830 1.721                

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.