The U.S. / China trade dispute remains front and center this morning...

Posted: Thursday, May 9, 2019 - 09:59 EDT

The U.S. / China trade dispute remains front and center this morning, with President Trump proclaiming that China “broke the deal”.  Vice Premier Liu resumes trade negotiations in the U.S. today although there is very little optimism that a deal will be made before Friday’s deadline.  The U.S. is expected to raise tariffs on $200bil of Chinese imported good from 10% to 25% tomorrow.  Trump announced that he may potentially increase that size of taxable goods, although the Chinese are expected to retaliate with their own tariffs on U.S. imports.  There are concerns among market participants, that the uncertainty may lead to slower global growth as increased volatility, affecting risk assets.  This morning, the Canadian trade deficit of $3.2bil was reported for March, a decline from the February deficit $3.4bil.  Exports in Canada rose by 3.2%, as a result of higher volumes rather than increased prices, while imports increased by 2.5%.  Export volumes were largely propelled by oil exports, while non-energy exports volumes were only higher by 1.5%.

Yesterday morning, BCE tapped the U.S. dollar market for a long deal, pricing $600mil at +142bps over 30Yr Treasuries.  On a swapped back basis, the new issue U.S. dollar BCE bonds were approximately 210bps over the curve on a Canadian dollar basis, which is about 10bps through the secondary Canadian market.  BCE followed up with a 5.7yr bond in the Canadian market by issuing an additional $600mil bonds at +117bps over the curve.  Proceeds from the new issue will be used to retire some upcoming 2020 maturities.  In secondary markets, the new BCE bonds were 1-2bps tighter yesterday afternoon but are currently close to new issue spread given the weaker tone this morning.  Apart from new issues, spreads ended the day largely unchanged.

Equity Markets:

  Index Level % Change QTD YTD Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
S&P 500 2,879.42 -0.16% 1.73% 15.61% 6.64% -0.76%

3.43%

7.71% -13.52% 13.65%
TSX

16,397.40

0.24%

2.08%

15.66%

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

1.53%

-0.02% 0.02% -0.35% 1.87% 1.97% 2.07% 2.34% 1.89% 1.52%
Canada 10 Year 1.66% -0.02%

0.05%

-0.31% 2.05% 2.09% 2.17% 2.43% 1.97% 1.62%
Canada 30 Year 1.93% -0.02% 0.03% -0.27% 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

3.42%

-0.02% 0.03% 0.03% 3.48% 3.47% 3.45% 3.72% 3.68% 3.39%
US 10 Year 2.45% -0.03% 0.05% -0.23% 2.41% 2.74% 2.86% 3.06% 2.69% 2.41%
CDX IG 65.394 3.165                

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.