The ECB released its monetary policy statement this morning

Posted: Thursday, June 6, 2019 - 10:59 EDT

The ECB released its monetary policy statement this morning that saw the main refinancing rate left unchanged at 0%.  The central bank sees rates at present levels through till at least the first half of 2020 and further added that they would be willing to hold rates unchanged for as long as necessary.  The new timeline extension to the first half of 2020 is six months longer than previously expected.  The ECB continued to stick to the script that reinvestment of QE debt will remain after the timing of the first rate hike.  In addition, a new round of TLTRO will be offered in September with hopes that the cheaper funding levels for banks will translate to higher consumer borrowing.  Overall inflation in the Euro area has declined from their highs back in the fall of 2018.  This morning, the U.S. trade balance narrowed from a deficit of $51.9bil to a shortfall of $50.8bil.  Exports declined by the largest margin in three years although this was attributed largely to fewer shipments of Boeing planes.  Imports also fell the most since January, which is highlighting the impact of trade tensions.  The April figures were prior to the new tariffs implemented by the U.S., which saw the U.S. hike tariffs on Chinese imported goods in May.  Additional tariffs on Mexican goods are also expected to rise by 5% starting on Monday if the two countries are not able to come to an agreement.

With the mildly more positive tone in both equity and fixed income markets yesterday, the Canadian corporate new issue market was active again.  AIMco Realty issued a $400mil 10-year bond that priced at +125bps over the curve.  The deal brought out more than 60 buyers with fills around 10%.  Glacier Credit Card Trust followed up with a two-tranche deal totaling $560mil.  The senior tranche priced at +96bps over the curve while the subordinated tranche came at +210bps.  Given the stronger sentiment, both deals tightened by approximately 1-2bps in secondary market.  The overall secondary corporate credit market also ended the day another 1-2bps tighter.

Equity Markets:

  Index Level % Change QTD YTD Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
S&P 500 2,823.62 -0.09% 0.08% 13.74% 6.64% -0.76%

3.43%

7.71% -13.52% 13.65%
TSX

16,207.33

-0.03%

1.18%

14.63%

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

1.30%

-0.04% -0.22% -0.59% 1.87% 1.97% 2.07% 2.34% 1.89% 1.52%
Canada 10 Year 1.43% -0.05%

-0.19%

-0.54% 2.05% 2.09% 2.17% 2.43% 1.97% 1.62%
Canada 30 Year 1.73% -0.02% -0.17% -0.46% 2.27% 2.23% 2.21% 2.42% 2.18% 1.89%
30yr Generic Corporate A rated Spread 1.45% -0.05% -0.05% -0.05% 1.21% 1.24% 1.28% 1.30% 1.50% 1.50%
30yr All-in Corporate A rated Yield

3.18%

-0.07% -0.22% -0.22% 3.48% 3.47% 3.45% 3.72% 3.68% 3.39%
US 10 Year 2.09% -0.04% -0.31% -0.59% 2.41% 2.74% 2.86% 3.06% 2.69% 2.41%
CDX IG 64.715 0.619                

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.