Global credit rebounded from oversold levels last week amid softer trade rhetoric from the White House, dovish Fed expectations and disappointing jobs data. US investment-grade spreads were 5-8 bp tighter led by financials and autos. The strong tone fuelled primary issuance with $25 billion of new bonds priced across 24 deals. Friday’s US payrolls report severely missed expectations, posting an increase of just 75k jobs compared to estimates of 175k. Treasury yields fell to new lows for the year as the jobs print all but solidified expectations for a Fed rate cut by July.
Canadian credit enjoyed a similarly strong week although indices demonstrated a lag effect by posting negative returns. The Canadian jobs report on Friday was upbeat for the second month in a row, with the unemployment rate falling to the lowest on record at 5.4%. In contrast to the US, the robust picture on the Canadian economy tempered expectations of a near term rate cut and sent the Canadian dollar to a 3-month high. Three issuers printed a total of $1.25 billion this week, highlighted by the inaugural subordinated note issuance by Canadian Western Bank which printed 250mm of a 10NC5 note at +235bp and traded 3 bp tighter on Friday.