UK Prime Minister May announced that she has secured a legally binding agreement...

Posted: Tuesday, March 12, 2019 - 09:11 EDT

UK Prime Minister May announced that she has secured a legally binding agreement related to the controversial Irish border clause.  As a result, May hopes to push a vote through parliament later today with optimism that the new agreement will garner support from the Northern Irish Democratic Unionist Party.  The EU has made concessions related to the Irish border from the previous deal back in December that includes a legally binding instrument to launch a formal dispute if required.  In addition, both the EU and UK will also commit to revisiting the backstop at the end of the Brexit transition period that is currently set for December 2020.  Despite the changes, the Labour party noted that the modifications are not materially different from the initial deal and vowed to vote against the bill in Parliament.  The DUP party has yet to commit on whether they will vote for or against the Brexit bill, with the UK pound weaker this morning on expectations that the deal will be rejected. 

On the economic front, the U.S. released inflation data this morning with headline CPI for February meeting expectations of 0.2%.  On a year over year basis, inflation slipped by 0.1% to 1.5% from January.  Energy prices have contributed negatively to inflation over the past year, but the stability of oil prices to start the year led to a 0.4% increase to energy inflation this past month.  Core inflation also ticked lower by 0.1% to 2.1% on a year over year basis and continues to track above the 2% mark.

The new issue Canadian corporate credit market was active yesterday despite the start to March break.  Canadian Pacific Railway issued in the Canadian market which has not occurred in almost a decade.  CP Rail priced at $400mil 10-year bond at +140bps over the curve.  There was strong demand for the credit with books almost five times oversubscribed.  Canadian Western Bank also decided to tap the new issue market yesterday with a $300mil 3-year deposit note at +117bps over the curve.  The overall tone remained strong yesterday leading to very little selling against the new deals and continued buying across the curve.  The new CWB bonds tightened a couple basis points in secondary trading, while the CP Rail new issue ended the day flat to the new issue spread.  Overall, spreads ended the day approximately 2-3bps tighter as a result of the better macro tone.

Equity Markets:

  Index Level % Change QTD YTD Q3 2017 Q4 2017 Q1 2018 Q2 2019 Q3 2019 Q4 2019
S&P 500 2,783.30 1.47% 11.49% 11.49% 4.48% 6.64%


3.43% 7.71% -13.52%





3.68% 4.44%


6.77% -0.56% -10.11%




% Change

QTD change

YTD change

Q3 2017

Q4 2017

Q1 2018

Q2 2018

Q3 2018

Q4 2018

Canada 5 Year


-0.01% -0.25% -0.25% 1.75% 1.87% 1.97% 2.07% 2.34% 1.89%
Canada 10 Year 1.75% -0.02% -0.22% -0.22% 2.10% 2.05% 2.09% 2.17% 2.43% 1.97%
Canada 30 Year 2.04% -0.01% -0.14% -0.14% 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


-0.01% -0.14% -0.14% 3.71% 3.48% 3.47% 3.45% 3.72% 3.68%
US 10 Year 2.65% 0.01% -0.04% -0.04% 2.33% 2.41% 2.74% 2.86% 3.06% 2.69%
CDX IG 60.057 0.076                

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.