Canadian employment for April soared...

Posted: Friday, May 10, 2019 - 09:43 EDT

Canadian employment for April soared posting the largest monthly gains on record.  The Canadian economy added 106.5k jobs, which exceeded expectations for an increase of 11.6k.  Most of the jobs added were full-time employment of 73k jobs while part-time employment increased by just over 33k.  The construction sector saw a rebound in the month after four straight months of jobs losses as a result of the harsher winter.  The retail and wholesale service producing sector also represented 30% of the gains.  The participation rate moved higher in the month by 0.2% to 65.9%, while the unemployment rate declined by 0.1% to 5.7%.  Following the strong employment data release, the Canadian dollar rallied by almost a penny against the U.S. dollar while front end Canadian rates moved higher by 3-5bps.  Implied probabilities for a rate cut in Canada out to October have moved lower from 34.8% to 24% as well.  In the U.S., CPI for April increased by 0.3% missing expectations for a rise of 0.4%.  On a yearly basis, headline inflation moved higher from March by 0.1% to 2.0%.  Yearly core inflation also increased by the same margin of 0.1% to 2.1%.  The core PCE deflator, that is tracked by the Fed, for March was reported at 1.6% which should give reason for the Fed to keep rates on hold in the near term regardless of higher CPI data in April.

The Canadian corporate credit market was softer again yesterday given the trade dispute between the U.S. and China.  The U.S. officially enacted 25% tariffs on $250bil of Chinese imported goods today.  Trump continued to indicate trade talks that resumed yesterday continue in a congenial manner.  It is foreseeable that China may retaliate with tariffs of their own.   As a result, the volatility translated to risks assets, corporate credit included, as flows remained lighter than usual.  Most investors stayed on the sidelines with the tone skewed more towards selling.  To end the day, spreads were approximately 2bps wider.

Equity Markets:

  Index Level % Change QTD YTD Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
S&P 500 2,870.72 -0.30% 1.46% 15.31% 6.64% -0.76%

3.43%

7.71% -13.52% 13.65%
TSX

16,321.75

-0.46%

1.61%

15.12%

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

1.60%

0.03%

0.08%

-0.29% 1.87% 1.97% 2.07% 2.34% 1.89% 1.52%
Canada 10 Year 1.72% 0.02% 0.10% -0.25% 2.05% 2.09% 2.17% 2.43% 1.97% 1.62%
Canada 30 Year 1.95% 0.00% 0.06% -0.23% 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

3.45%

0.00% 0.06% 0.06% 3.48% 3.47% 3.45% 3.72% 3.68% 3.39%
US 10 Year 2.45% 0.01% 0.05% -0.23% 2.41% 2.74% 2.86% 3.06% 2.69% 2.41%
CDX IG 63.379 0.325                

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.