Highlights from the Week in Corporate Credit:
December 2 – 6, 2019

Global credit trended tighter throughout the week amid an improving outlook for a ‘Phase 1’ trade deal before December 15th and capped off by a stellar US jobs report on Friday. US credit spreads tightened by 3-5 basis points while Treasury yields rose 5-6bp as trade rhetoric fuelled optimism for a pre-Christmas equity rally. The jobs report showed an unexpected increase of 266k jobs in November, significantly outpacing the average expectation of 180k. In the next few days, we expect a busy calendar of potentially market-moving events, including rates decisions in the US and Europe, UK election results and finally, the tentative date for increased US-China tariffs.

Canadian credit tightened by an average of 3 basis points despite a heavy week for primary issuance. In contrast to the US employment report, the Canadian jobs number came in soft.   Government yields finished up to 10 bp higher on the week after the Bank of Canada took a more upbeat tone in its monthly report on the economy.  A total of $5.1 billion of new corporate bonds printed, dominated by Canadian and foreign banks. National Australia Bank ($NAB) printed a 2025 subordinated note at a spread of +197.  Investors were surprised to see the deal upsized from $500mm to $1bn but liked the spread enough to push the bond 4 bp tighter in early trading.

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