The FOMC minutes were released yesterday

Posted: Thursday, October 12, 2017 - 08:40 EDT

The FOMC minutes were released yesterday, as Fed members discussed why inflation continues to remain soft.  Members either viewed inflation as being transitory, which has been the language continually repeated in their statements, although many are also unsure whether there will be longer term persistency to lower CPI.  The uncertainty within the FOMC in regards to inflation has made the path for future rate hikes somewhat unclear for next year.  However, many participants also believed that another increase to the Fed Funds Rates later this year is likely to be warranted.  As of this morning, implied probabilities for a rate hike in December currently stand at 76%.  NAFTA negotiations continue to be in focus this week, as Prime Minister Trudeau was in Washington yesterday to meet with President Trump.  However, Trump continued to reiterate that it is possible the U.S. would not be able to make a deal and NAFTA would need to be eliminated.  However, the President did insinuate that a bilateral deal could be made with one country or the other.

The new issue Canadian corporate credit market was again active yesterday with Nissan Canada issuing $500mil three year bonds that priced at +79bps over the curve.  Enbridge also re-opened its 60NC10 hybrid debt that was just issued in September and raised $650mil.  Lastly, Metro reached an agreement yesterday to sell most of its Couche-Tard stock to fund the Jean Coutu acquisition that is expected to raise approximately $1.55bil.  These two new issues were the focus in the market yesterday, and very little selling came out against the new deals.  As a result, credit spreads continued to be unchanged to end the day.

Equity Markets:

  Index Level % Change QTD YTD Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017
S&P 500 2,555.24 0.18% 1.49% 15.94% 2.44% 3.85% 3.82% 6.07% 3.09% 4.48%
TSX 15,800.40 0.19% 1.16% 5.65% 5.06% 5.45% 4.53% 2.41% -1.64% 3.68%

Rates:

  Today % Change QTD change YTD change June 30 2016 Sept 30 2016 Dec 31 2016

March 31 2017

June 30  2017 Sept 30 2017
Canada 5 Year 1.768% -0.01% 0.02% 0.65% 0.569% 0.615% 1.150% 1.119% 1.393% 1.753%
Canada 10 Year 2.104% -0.02% 0.00% 0.48% 1.059% 0.990% 1.750% 1.625% 1.762% 2.099%
Canada 30 Year 2.453% -0.03% -0.02% 0.15% 1.714% 1.658% 2.350% 2.302% 2.148% 2.472%
30yr Generic Corporate A rated Spread 1.240% 0.00% 0.00% -0.09% 1.610% 1.530% 1.390% 1.330% 1.210% 1.240%
30yr All-in Corporate A rated Yield 3.693% -0.03% -0.02% 0.06% 3.324% 3.188% 3.740% 3.632% 3.358% 3.712%
US 10 Year 2.332% -0.02% 0.00% -0.06% 1.47% 1.60% 2.50% 2.39% 2.31% 2.33%
CDX IG 55.354 0.593                

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.