The tone to start the week is similar to last week...

Posted: Monday, June 17, 2019 - 09:43 EDT

The tone to start the week is similar to last week, where the ongoing trade disputes and protests in Hong Kong remain in the headlines.  This week, the focus will switch to the FOMC announcement on Wednesday.  The current implied probabilities are only pricing in a 19% chance of a rate cut this meeting.  However, the recent string of weaker economic data out of the U.S. have markets pricing in an 82% chance of a rate cut at the July meeting, and a 95% chance the Fed lowers rates by 25bps by September. 

This afternoon, the Bank of Canada’s Deputy Governor Schembri will speak in Alberta regarding the inflation renewal target.  In the past, the central bank spoke about various policy framework alternatives that could include raising the inflation target or adding data points such as employment or GDP.  This is ahead of the 2021 inflation target renewal date.

The Canadian corporate credit market was relative quiet on Friday given that many market participants were still riding a high following the Raptors’ championship win.  The focus this week will be on new issuance.  The Canadian corporate new issue market was active last week that included a $1.5bil CIBC Tier-2 sub-debt.  This morning, issuers including GM Financial and CNH are looking to price their ABS deals.  The RBC REAL-T deal is also expected to launch early this week.  Otherwise, most other issuers will likely be on the sidelines until after the FOMC announcement on Wednesday.  To end Friday, corporate credit spreads ended the day mostly unchanged.

Equity Markets:

  Index Level % Change QTD YTD Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019
S&P 500 2,886.98 -0.16% 2.32% 16.29% 6.64% -0.76%

3.43%

7.71% -13.52% 13.65%
TSX

16,301.91

0.39%

1.88%

15.43%

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

1.34%

0.00%

-0.18%

-0.55% 1.87% 1.97% 2.07% 2.34% 1.89% 1.52%
Canada 10 Year 1.45% 0.00% -0.17% -0.52% 2.05% 2.09% 2.17% 2.43% 1.97% 1.62%
Canada 30 Year 1.70% -0.02% -0.20% -0.49% 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

3.15%

-0.02% -0.25% -0.25% 3.48% 3.47% 3.45% 3.72% 3.68% 3.39%
US 10 Year 2.11% 0.03% -0.29% -0.57% 2.41% 2.74% 2.86% 3.06% 2.69% 2.41%
CDX IG 61.198 -0.253                

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.