The Federal Reserve released its monetary policy decision yesterday

Posted: Thursday, February 1, 2018 - 09:09 EST

The Federal Reserve released its monetary policy decision yesterday afternoon and decided to leave the Fed Funds Rate unchanged.  The FOMC statement reiterated that the U.S. economy has improved significantly, as strong employment has led to higher household spending and business fixed investment.  Inflation remains below the Fed’s target of 2%, with survey-based measures of longer-term inflation expectations little changed.  Overall, the Fed expects inflation to remain somewhat below the 2% target, but should move higher this year.  The statement sets up the potential for the Fed to raise rates by 25bps at the March meeting, with the FOMC expecting three rate hikes this year.

There continued to be some weakness on Canadian corporate credit spreads for the second day with new issue supply.  Central 1 Credit Union issued at 3yr FRN, however most of the focus was on Scotiabank issuing $2bil 10yr deposit notes at 80bps over the curve.  For the most part, Canadian banks have chosen to fund outside of Canada in the latter part of 2017 and the start of the New Year.  As a result, there was strong demand for the BNS bonds, seeing 74 buyers, books closing around $3.25bil and fills in the 20-30% range.  There was some selling related to the new issues, as well as profit taking that led to spreads marginally wider to end the day.

Equity Markets:

 

  Index Level % Change QTD YTD Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017
S&P 500 2,823.81 0.05% 5.73% 5.73% 3.85% 3.82% 6.07% 3.09% 4.48% 6.64%
TSX

15,951.67

-0.02% -1.39%

-1.39%

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

2.098%

0.02% 0.23% 0.23% 0.615% 1.150% 1.119% 1.393% 1.753% 1.866%
Canada 10 Year 2.313% 0.02% 0.27% 0.27% 0.990% 1.750% 1.625% 1.762% 2.099% 2.045%
Canada 30 Year 2.380% 0.00% 0.11% 0.11% 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

3.590%

0.00% 0.11% 0.11% 3.188% 3.740% 3.632% 3.358% 3.712% 3.476%
US 10 Year 2.745% 0.04% 0.34% 0.34% 1.60% 2.50% 2.39% 2.31% 2.33% 2.41%
CDX IG 47.118 -0.343                

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.