U.S. equity futures are pointing to a negative open

Posted: Monday, July 8, 2019 - 09:21 EDT

U.S. equity futures are pointing to a negative open after a quiet overnight session.  Friday’s nonfarm payroll numbers reverberated through Asian markets, which closed 1-2% lower as the probability of rate cuts were lowered.  European markets are generally down as well after Deutche Bank announced a significant restructuring.  Rates are largely unchanged after Friday’s selloff.  U.S. 10yr bond yields are flat at 2.04%, while the Canadian 10yr levels are also unchanged at  1.57%.  There continues to be some buying in Canadian credit despite yields moving slightly higher after Friday’s dual employment releases.

A great deal of the focus for the week may be on the testimony from Fed Chair Jerome Powell on Wednesday, as well as from comments from the Bank of Canada on the rate decision, also on Wednesday. We expect the BofC to remain on hold and neutral but acknowledge lower growth expectations and lower global/U.S. rates.

The Canadian banks have been finding non domestic markets to be an attractive funding source of late.  The lower year-to-date issuance has been one of the drivers of the stronger spread tone so far in 2019. We will continue watch to see if issuance during July continues the trend of lower new supply volumes, which would keep a directional tightening bias for spreads in the coming weeks.  

Equity Markets:

  Index Level % Change QTD YTD Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019
S&P 500 2,990.41 -0.18% 1.69% 20.55% -0.76% 3.43%

7.71%

-13.52% 13.65% 4.30%
TSX

16,541.99

-0.28%

0.98%

17.36%

-4.52% 6.77%

-0.56%

-10.11% 13.29% 2.58%

Rates:

 

Today

% Change

QTD change

YTD change

Q1 2018

Q2 2018

Q3 2018

Q4 2018

Q1 2019

Q2 2019

Canada 5 Year

1.56%

0.13%

0.16%

-0.33% 1.97% 2.07% 2.34% 1.89% 1.52% 1.39%
Canada 10 Year 1.59% 0.12% 0.12% -0.38% 2.09% 2.17% 2.43% 1.97% 1.62% 1.47%
Canada 30 Year 1.75% 0.09% 0.06% -0.44% 2.23% 2.21% 2.42% 2.18% 1.89% 1.69%
30yr Generic Corporate A rated Spread 1.40% 0.00% 0.00% 0.00% 1.24% 1.28% 1.30% 1.50% 1.50% 1.40%
30yr All-in Corporate A rated Yield

3.15%

0.09% 0.06% 0.06% 3.47% 3.45% 3.72% 3.68% 3.39% 3.09%
US 10 Year 2.03% 0.00% 0.03% -0.65% 2.74% 2.86% 3.06% 3.06% 2.69% 2.41%
CDX IG 53.579 0.403                

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.