Global credit continues to enjoy a strong month as investors appear willing to shrug off mixed quarterly earnings and soft economic data. US credit spreads tightened by 3-5 bp while the US 10-year Treasury yield remains range-bound near 1.80%. Trade optimism was the main driver with a possible “phase one” deal between the US and China being finalized. Corporate earnings were in full swing with most guiding for lower earnings in 2020. In Europe Mario Draghi chaired his last policy meeting on Thursday, delivering a weak assessment of the European economy but offering little in the way of new stimulus as he hands off the reigns of the ECB to successor Christine Lagarde.
Canadian credit markets improved as a lack of primary supply and relative cheapness to the US improved investor confidence. The federal election passed without much disruption and credit spreads drifted 2-3 bp lower throughout the week. Canadian National Railway offered the lone new issue in a quiet week, printing a long 30-year bond at +145.
Earnings announcements are set to continue with more than 140 companies reporting this week. The Fed’s next rates decision comes on Wednesday and most pundits expect a 25 basis point cut. European politics remains on the radar as Brexit looks set for another delay and a likely UK general election before year-end.