WTI crude prices are approximately 4% higher this morning

Posted: Thursday, June 13, 2019 - 09:28 EDT

WTI crude prices are approximately 4% higher this morning after dropping earlier this week to levels near the $50/barrel range.  To start the year, oil was trading under $50.  This morning, there are reports of damage to two oil tankers near the Persian Gulf as a result of suspected attacks.  The source of the incidents has yet to be determined although there are fears that the conflict with escalation current tensions between the U.S. and Iran.  The Trump administration has continued to target Iran by imposing sanctions on Iranian oil exports, which has led to a strained relationship between the two nations.  The household debt-to-income for Canadians in Q1 declined by 0.7% from last quarter.  However, the metric continues to track near all-time highs at 173%.  On a positive note, net worth for Canadians did rise by 3% in the quarter.  Otherwise, North American equity market futures are also pointing towards a higher open.  Despite ongoing trade tensions, the ongoing expectation that the Fed will have to cut rates later this year continues to support equity markets.  This morning, both Canadian and U.S. bonds yields are lower again with the 10-year Canadian bond again under 1.50%

It was a busy session in the new issue Canadian corporate credit market yesterday.  CIBC priced $1.5bil NVCC 10NC5 bonds that priced at +155bps over the curve.  Books were well two times oversubscribed with buyers totaling 79.  MCAP Commercial LP followed up with a $100mil 5-year bond at +275bps over the curve.  MCAP was refinancing a bond that matured back in March.  Late in the day, John Deere Financial came to the market with two tranches – a $150mil 2.25-year FRN and a $200mil 5.25-year bullet.  With the tone remaining positive through the trading day, all new issues continued to tighten a couple basis points in secondary trading.  Flows outside of new issues were focused on selling against the new bonds.  As a result, there was a focus on financial bonds.  To end the day, spreads continued to tighten by approximately 1bps.

Equity Markets:

  Index Level % Change QTD YTD Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
S&P 500 2,879.84 -0.20% 2.02% 15.95% 6.64% -0.76%

3.43%

7.71% -13.52% 13.65%
TSX

16,227.24

-0.13%

1.33%

14.80%

4.44% -4.52%

6.77%

-0.56% -10.11 13.27%

Rates:

 

Today

% Change

QTD change

YTD change

Q4 2017

Q1 2018

Q2 2018

Q3 2018

Q4 2018

Q1 2019

Canada 5 Year

1.38%

-0.05%

-0.14%

-0.51% 1.87% 1.97% 2.07% 2.34% 1.89% 1.52%
Canada 10 Year 1.48% -0.05% -0.14% -0.49% 2.05% 2.09% 2.17% 2.43% 1.97% 1.62%
Canada 30 Year 1.74% -0.04% -0.15% -0.45% 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

3.19%

-0.04% -0.20% -0.20% 3.48% 3.47% 3.49% 3.72% 3.68% 3.39%
US 10 Year 2.12% -0.01% -0.29% -0.57% 2.41% 2.74% 2.86% 3.06% 2.69% 2.41%
CDX IG 60.873 -0.671                

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.