Market volatility continues to ease this morning

Posted: Friday, May 19, 2017 - 10:21 EDT

Market volatility continues to ease this morning, with the VIX index at 13.49 after hitting an intraday high yesterday of 16.  President Trump spoke yesterday evening and answered questions around any contact with Russia and imposing his will to have Comey drop the investigation on Flynn.  Trump distanced himself and noted that he could only comment for himself that there was no communication with Russia.  Globally, Brazil continues to deal with political issues after reports that President Temer was involved in an alleged cover-up scheme with former speaker of the house, who is currently in jail.  This news follows previous political turmoil leading to the impeachment of the former president.
 
Canadian inflation year over year in April came in at 1.6%, just slightly below expectations of 1.7%.  Energy prices rose although food prices moderated.  Core CPI continues to track on the lower end at 1.3% y/y, confirming the Bank of Canada’s comments that core inflation has been weakening along with slower wage growth.  However, Canadian retail sales surged in March, rising 0.7% over the month against consensus of a 0.3% increase.  Also positive was the increase in volumes by 1.2%, as purchases from new car dealers was the largest contributing factor.  Retail sales ex autos fell by 0.2% over the month, underpinning weakness in other retail sectors outside of automobile sales.
 
Yesterday was also volatile for Canadian corporate bonds following the fallout from the allegations against President Trump.  Financials continue to be under pressure, with volumes skewed towards selling of deposit notes and U.S. banks.  Late in the day, markets began to stabilize and as a result, spreads closed the day mostly unchanged.  Laurentian Bank announced yesterday plans to acquire Northpoint Commercial Finance, which will allow the bank to grow their lending business in both the U.S. and Canada.  Laurentian Bank will acquire Northpoint’s $1.2 billion equipment lending book with an equity bought deal of $225 million.  Early guidance indicates that CET1 ratio will range from 7.8%-8.2% after closing the transaction, after previously announcing Q1 2017 CET1 ratio of 8.22%.

Equity Markets:

  Index Level % Change QTD YTD Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017
S&P 500 2,365.72 0.37% 0.13% 5.67% 6.45% 0.96% 2.44% 3.85% 3.82% 6.07%
TSX 15,277.20 0.02% -1.74% -0.07% -2.23% 3.75% 5.06% 5.45% 4.53% 2.41%

Rates:

  Today % Change QTD change YTD change Dec 31  2015 March 31 2016 June 30 2016 Sept 30  2016 Dec 31 2016 March 31 2017
Canada 5 Year 0.938% 0.01% -0.18% -0.21% 0.727% 0.621% 0.569% 0.615% 1.150% 1.119%
Canada 10 Year 1.457% 0.01% -0.17% -0.29% 1.390% 1.225% 1.059% 0.990% 1.750% 1.625%
Canada 30 Year 2.085% 0.01% -0.22% -0.27% 2.147% 2.003% 1.714% 1.658% 2.350% 2.302%
30yr Generic Corporate A rated Spread 1.260% 0.00% -0.07% -0.13% 1.610% 1.510% 1.610% 1.530% 1.390% 1.330%
30yr All-in Corporate A rated Yield 3.345% 0.01% -0.29% -0.40% 3.757% 3.513% 3.324% 3.188% 3.740% 3.632%
US 10 Year 2.242% 0.01% -0.15% -0.26% 2.28% 1.77% 1.47% 1.60% 2.50% 2.39%
CDX IG 63.651 -0.890                

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.