The overall tone continues to improve...

Posted: Monday, June 10, 2019 - 09:32 EDT

The overall tone continues to improve after the U.S. administration announced that it will delay the 5% tariffs on Mexican imported goods.  These tariffs would increase to 25% if Mexico did not implement a plan to secure the U.S.-Mexico border.  On Friday, Mexico announced that it has agreed to take a tougher stance on immigration along with purchasing larger quantities of agricultural goods from the U.S.  Tariff talks between the U.S. and China appeared to be back on more solid footing over the weekend.  U.S. Treasury Secretary Mnuchin indicated that discussions with the Chinese Governor were very candid and constructive.  Although he did note that no big announcement will occur prior to the G20 meeting and that majority of the progress could occur at a meeting between both nations’ Presidents if it were to happen.  As a result of the diverted tariffs, European equity markets are higher this morning while North American equity futures are up as well.  Bond yields are also higher by 3-4bps across the curve in both Canada and the U.S. given the more risk-on sentiment this morning.

The tone on Friday in the Canadian corporate credit market was improved as well.  As a result, HSBC Bank Canada issued a $1bil 3-year bond at +88bps over the curve.  Given the more risk-on tone, several ABS deals are launching investor roadshows this week including BMW Canada and Real-T.  This morning, RBC announced that it would redeem an NVCC bond that will occur on July 17.  The outstanding bonds amount to $1bil, which could lead to additional tier-2 issuance from the bank later this year.  As a result of the better overall sentiment on Friday, spreads ended the day approximately 1-3bps tighter.

Equity Markets:

  Index Level % Change QTD YTD Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
S&P 500 2,873.34 1.05% 1.79% 15.68% 6.64% -0.76%

3.43%

7.71% -13.52% 13.65%
TSX

16,230.96

0.02%

1.35%

14.82%

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

1.39%

0.06%

-0.13%

-0.50% 1.87% 1.97% 2.07% 2.34% 1.89% 1.52%
Canada 10 Year 1.51% 0.05% -0.11% -0.46% 2.05% 2.09% 2.17% 2.43% 1.97% 1.62%
Canada 30 Year 1.76% 0.02% -0.13% 0.42% 2.27% 2.23% 2.21% 2.42% 2.18% 1.89%
30yr Generic Corporate A rated Spread 1.45% 0.00% -0.05% -0.05% 1.21% 1.24% 1.28% 1.30% 1.50% 1.50%
30yr All-in Corporate A rated Yield

3.21%

0.02% -0.18% -0.18% 3.48% 3.47% 3.45% 3.72% 3.68% 3.39%
US 10 Year 2.14% 0.06% -0.27% -0.55% 2.41% 2.74% 2.86% 3.06% 2.69% 2.41%
CDX IG 60.456 -1.754                

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.