There is further speculation this morning...

Posted: Monday, April 15, 2019 - 09:39 EDT

There is further speculation this morning that the U.S. and China continue to move closer to a potential deal.  News reports are indicating that China is considering lifting tariffs on certain agricultural products that were initially targeted last year as part of the new taxes on $50bil of U.S. imported goods.  This reversal would allow President Trump to tout a win for his key voter base that includes farmers.  Opening up trade would also allow China to import additional U.S. goods going forward.  Over the weekend, Treasury Secretary Mnuchin was hopeful that discussions were very close and conceivably leading to the final rounds at the table. 

Outside of global trade, the economic calendar in Canada will start with the business outlook survey today, and headline inflation on Wednesday is expected to increase at 1.9%.  CPI should move higher from 1.5% in February given higher gasoline and energy prices to start the year.  Both Canada and the U.S. will release retail sales data on Thursday with expectations of a rebound in consumption in March of 0.4% and 1.0%, respectively.

Goldman Sachs and Citigroup reported earnings this morning.  Goldman Sachs reported first quarter earnings of $2.25bil that saw investment banking revenue up 1% from a year ago but lower by 11% in the fourth quarter.  FICC and equity trading revenues moved positively higher from last quarter but continue to be weak on a yearly basis.  Provisions for credit losses remained benign with the CET1 ratio remaining strong at 13.4%.

In the Canadian corporate credit market, the demand for spread product was extremely strong on Friday.  Leading up to the Easter weekend, the new issue calendar is expected to be front loaded if issuers decide to tap the market.  The stronger tone from Friday is carrying over to start the week with corporate credit spreads anywhere from 1-3bps tighter to close Friday.

Equity Markets:

  Index Level % Change QTD YTD Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
S&P 500 2,907.41 0.66% 2.66% 16.67% 6.64% -0.76%

3.43%

7.71% -13.52% 13.65%
TSX

16,480.53

0.49%

2.47%

16.09%

4.44% -4.52%

6.77%

-0.56% -10.11 13.29%

Rates:

 

Today

% Change

QTD change

YTD change

Q4 2017

Q1 2018

Q2 2018

Q3 2018

Q4 2018

Q1 2019

Canada 5 Year

1.66%

0.08%

0.15%

-0.22% 1.87% 1.97% 2.07% 2.34% 1.89% 1.52%
Canada 10 Year 1.80% 0.08% 0.18% -0.17% 2.05% 2.09% 2.17% 2.43% 1.97% 1.62%
Canada 30 Year 2.08% 0.07% 0.19% -0.10% 2.27% 2.23% 2.21% 2.42% 2.18% 1.89%
30yr Generic Corporate A rated Spread 1.50% 0.00% 0.00% 0.00% 1.21% 1.24% 1.28% 1.30% 1.50% 1.50%
30yr All-in Corporate A rated Yield

3.58%

0.07% 0.19% 0.19% 3.48% 3.47% 3.45% 3.72% 3.68% 3.39%
US 10 Year 2.56% -0.01% 0.15% -0.13% 2.41% 2.74% 2.86% 3.06% 2.69% 2.41%
CDX IG 56.735 0.475                

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.