US markets led global credit higher this week on the back of strong corporate earnings and positive (if somewhat conflicting) developments on trade. Investors appear content with the narrative that the US and China have agreed to reduce tariffs on each other’s goods while still on track for a “Phase 1” deal. US credit spreads rallied 5-10 basis points tighter with high beta non-financials outperforming. Global sovereign yields rose substantially with US 10-year Treasury yield up 18 bp this week to finish at a 3-month high. German and Japanese government yields were similarly higher on the week, and the amount of negative yield debt in the world has now fallen 30% from the August highs.
Canadian credit tightened 3-5 basis points amidst a busy week for new corporate bond issuance. Both Ford and GM launched Canadian dollar deals, and Capital Power printed a 10-year bond at +281 to the government curve. The deal was heavily oversubscribed and finished 10 bp tighter while repricing the secondary spreads. Canadian government yields rose but lagged global markets after Canadian employment numbers released on Friday disappointed investors