NAFTA representatives commented that good progress had been made...

Posted: Tuesday, January 30, 2018 - 09:07 EST

After wrapping up the sixth round of NAFTA negotiations yesterday, representatives from the three countries commented that good progress had been made although at a very slow pace.  Canadian Foreign Minister Freeland did remark that there were still some gaps to resolve and is expected to speak later today.  The U.S. Trade Representative Lighthizer shed some light on the current proposal to have 85% of new vehicles made in North America and 50% originating from the U.S. in order to avoid tariffs.  Canada wishes to add elements that include R&D or intellectual property into these calculations, and although Lighthizer called these ideas vague, it is encouraging that Canada is willing to discuss these core issues.  On the economic front, Euro area GDP for the fourth quarter was reported at 0.6%.  The ECB will continue to be cautious even though the Eurozone has posted some of the strongest growth over the past decade.

The new issue Canadian corporate credit market was active yesterday.  RioCan REIT issued $300mil 5yr bonds at +105bps over the curve while National Bank priced $750mil 10NC5 NVCC sub-debt at +108bps over the curve.  This is the inaugural NVCC sub-debt issuance from National Bank as tightening spreads has allowed for lower cost of funding.  Otherwise, spreads on the day were mostly unchanged while Canadian government yields continue to grind higher.

Equity Markets:

 

  Index Level % Change QTD YTD Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017
S&P 500 2,853.53 -0.67% 6.83% 6.83% 3.85% 3.82% 6.07% 3.09% 4.48% 6.64%
TSX

16,094.72

-0.89% -0.57%

-0.57%

5.45% 4.53% 2.41% -1.64% 3.68% 4.44%

Rates:

 

Today

% Change

QTD change

YTD change

Sept 30 2016

Dec 31 2016

Mar 31 2016

June 30 2017

Sept 30  2017

Dec 31  2017

Canada 5 Year

2.085%

0.02% 0.22% 0.22% 0.615% 1.150% 1.119% 1.393% 1.753% 1.866%
Canada 10 Year 2.295% 0.03% 0.25% 0.25% 0.990% 1.750% 1.625% 1.762% 2.099% 2.045%
Canada 30 Year 2.358% 0.03% 0.09% 0.09% 1.658% 2.350% 2.302% 2.148% 2.472% 2.266%
30yr Generic Corporate A rated Spread 1.21% 0.00% 0.00% 0.00% 1.530% 1.390% 1.330% 1.210% 1.240% 1.210%
30yr All-in Corporate A rated Yield

3.568%

0.03% 0.09% 0.09% 3.188% 3.740% 3.632% 3.358% 3.712% 3.476%
US 10 Year 2.696% 0.00% 0.29% 0.29% 1.60% 2.50% 2.39% 2.31% 2.33% 2.41%
CDX IG 47.253 1.525                

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.