U.S. non-farm payrolls for January saw an increase of 200k

Posted: Friday, February 2, 2018 - 08:59 EST

U.S. non-farm payrolls for January saw an increase of 200k, which was above expectations of +180k.  The unemployment rate remained unchanged at this cycle’s low of 4.1%.  The increase in average hourly earnings added to the positive momentum in the jobs report, which saw a year over year increase of 2.9% that moved higher from the 2.7% reading last month.  Wages increased in January at the strongest pace since June 2009.  The solid tone of today’s release reinforces the Fed’s intention to increase rates by 25bps at the March meeting.  In addition, the U.S. dollar has also moved higher following the report after some weakness to start the year.

Overnight, the Bank of Japan increased the purchase of government bonds as the central bank continues to target the 10 year yield at 0%.  As yields grind higher globally, Japanese yields have followed suit causing the BOJ to pledge an unlimited amount of bond purchases in order to achieve its 0% target.  This message reinforces the fact that the BOJ has no intent on removing monetary stimulus with minimal inflation pressures going forward.  Otherwise, Canadian government and U.S. Treasury yields continued to march higher this week with ten year yields up approximately 9bps and 12bps, respectively.  There continued to be floating rate issuance in the Canadian corporate credit market with CIBC pricing $600mil 2yr FRN deposit notes at +8bps over 3MCDOR.  Flows were more modest yesterday with spreads ending the day mostly unchanged.

Equity Markets:

 

  Index Level % Change QTD YTD Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017
S&P 500 2,821.98 -0.06% 5.68% 5.68% 3.85% 3.82% 6.07% 3.09% 4.48% 6.64%
TSX

15,860.92

-0.57% -1.96%

-1.96%

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

2.159%

0.08% 0.29% 0.29% 0.615% 1.150% 1.119% 1.393% 1.753% 1.866%
Canada 10 Year 2.381% 0.09% 0.34% 0.34% 0.990% 1.750% 1.625% 1.762% 2.099% 2.045%
Canada 30 Year 2.442% 0.08% 0.18% 0.18% 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

3.652%

0.08% 0.18% 0.18% 3.188% 3.740% 3.632% 3.358% 3.712% 3.476%
US 10 Year 2.790% 0.00% 0.38% 0.38% 1.60% 2.50% 2.39% 2.31% 2.33% 2.41%
CDX IG 48.819 1.668                

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.