Global credit continues to advance slowly in July amid higher issuance volumes, steeper yield curves and improving oil prices. Investors watched closely as Fed chair Powell testified before Congress, looking for greater clarity on US interest rate policy over the next 12 months. A July rate cut is now all but assured, and Powell appeared to express sufficient concern over global economic strength to suggest additional cuts will follow. Central Bank dovishness, combined with modestly improving economic indicators pushed 10-year yields higher in North America and Europe. Credit spreads generally improved though bank spreads languished on due to heavy Japanese bank issuance and expectations of pending issues from US banks once the current earnings blackout is lifted.
Canadian credit outperformed as a relatively strong domestic macro backdrop was supported by a dovish Bank of Canada policy announcement on Wednesday. Credit generally tightened by 2-4 bp, highlighted by high beta sectors like TMT, REITs and Energy. The primary market in Canada was also very active with $2.2bn of bonds priced across issuers National Bank, First Capital Realty and Northern Courier Pipeline.