The fourth quarter of 2019 got off to a difficult start as weak US manufacturing data and impeachment headlines spooked risk markets. US credit widened 3-5 basis points after disappointing manufacturing and services data renewed fears of an impending recession. US Treasury yields tumbled with the 10-year falling by 15bp and the rate curve steepening as the market priced in additional rate cuts. Finally, Friday’s US employment report came in below expectations but suggested the American economy is perhaps not as dire as priced in earlier in the week. Despite the negative economic and political tone, investment grade credit markets remain orderly as fund flows suggest investors continue to move money out of equities and into fixed income.
Canadian credit markets generally followed the global risk-off tone. Primary issuance slowed down with just $2.8bn pricing across four issuers. The Fédération des Caisses Desjardins du Québec ($CCDJ) launched its inaugural bail-in bond, printing $1 billion of a 5-year note at +105bp. Most new deals struggled to perform this week given the volatile environment; generally finishing 2bp wider than issue.