Overnight, the U.S. Senate passed the tax reform bill

Posted: Wednesday, December 20, 2017 - 08:47 EST

Overnight, the U.S. Senate passed the tax reform bill that will cut the corporate tax rate from 35% to 21% as well as the increasing the budget deficit to $1.5 trillion.  The bill will now move to the House for a final vote today, with the new legislative measures expected to be positive for growth over the next couple of years.  The U.S. Congress is expected to pass the bill with ease, which was previously approved.  However, the Democrats demanded a minor tweak to the name of a provision, which required Congress to reapprove the bill.  Congress will also be busy working on passing legislation to avoid a government shutdown leading up to the holiday season.  Previously the U.S. government delayed this until December 22.

There was a positive tone in the Canadian corporate credit market yesterday as the U.S. tax reform bill was expected to pass.  There continued to be buyers of corporate credit with flows mostly concentrated on the front end of the curve.  However, leading up to the holiday season, volumes were muted and as a result, reduced flows were not significant enough to push spreads materially tighter.

Equity Markets:

  Index Level % Change QTD YTD Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017
S&P 500 2,681.47 -0.32% 6.90% 22.13% 2.44% 3.85% 3.82% 6.07% 3.09% 4.48%
TSX

16,133.35

0.01% 3.78%

8.40%

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

Mar 31 2016

June 30 2017

Sept 30  2017

Canada 5 Year

1.795%

0.10% 0.04% 0.68% 0.569% 0.615% 1.150% 1.119% 1.393% 1.753%
Canada 10 Year 1.982% 0.12% -0.12% 0.26% 1.059% 0.990% 1.750% 1.625% 1.762% 2.099%
Canada 30 Year 2.244% 0.11% -0.23% -0.07% 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

3.484%

0.11% -0.23% -0.16% 3.324% 3.188% 3.740% 3.632% 3.358% 3.712%
US 10 Year 2.459% -0.01% 0.13% 0.01% 1.47% 1.60% 2.50% 2.39% 2.31% 2.33%
CDX IG 49.218 -1.085                

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.