The Canadian household debt ratio rose to an all-time high

Posted: Thursday, March 14, 2019 - 09:49 EDT

In Canada, the Canadian household debt ratio rose to an all-time high in the fourth quarter to 174%.  The is consistent with the Bank of Canada stance that household debt remains at elevated levels and may be more susceptible to interest rate sensitivity moving forward.  The housing market in Canada was soft last year given the new B-20 mortgage rules, along with higher mortgage servicing costs.  As a result, the national new worth fell by 3% as real estate remains a strong contributor to personal wealth.  This was the largest decline since 2009.

Yesterday evening, U.K. officials were back in parliament debating whether to leave the EU without a deal ahead of the March 29 deadline.  Parliament voted to reject a no-deal Brexit by a margin of 312 to 308, which only narrowly passed.  There is marginally more certainty now that the U.K. will not have a hard Brexit in two weeks and will leave the EU only when a deal has been defined.  Today, MPs are back voting upon whether to delay the March 29 deadline.  It is still uncertain whether the U.K. will ask for a three month extension, which would push the new timeline to June 30, or if the postponement could be a longer timeframe. 

The tone in the Canadian corporate credit market remains constructive this morning despite a small setback related to China and U.S. trade negotiations.  Although it was optimistic to believe that a trade deal between the two nations could be finalized this month, both sides continue to indicate that progress is steadily improving.  As a result, the meeting between President Trump and President Xi has been postposed, potentially in April, if further headway is achieved.  With potentially a smaller new issue supply to end the March break week, flows continued to be two-way.  Spreads were mostly unchanged to end yesterday.

Equity Markets:

  Index Level % Change QTD YTD Q3 2017 Q4 2017 Q1 2018 Q2 2019 Q3 2019 Q4 2019
S&P 500 2,810.92 0.69% 12.61% 12.61% 4.48% 6.64%

-0.76%

3.43% 7.71% -13.52%
TSX

16,149.97

0.08%

13.34%

13.34%

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

1.66%

0.02% -0.23% -0.23% 1.75% 1.87% 1.97% 2.07% 2.34% 1.89%
Canada 10 Year 1.76% 0.02% -0.21% -0.21% 2.10% 2.05% 2.09% 2.17% 2.43% 1.97%
Canada 30 Year 2.04% 0.01% -0.15% -0.15% 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

3.54%

0.01% -0.15% -0.15% 3.71% 3.48% 3.47% 3.45% 3.72% 3.68%
US 10 Year 2.63% 0.00% -0.06% -0.06% 2.33% 2.41% 2.74% 2.86% 3.06% 2.69%
CDX IG 58.611 0.466                

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.