Last week brought some long-awaited clarity to risk assets with central bank rate announcements, positive developments on US-China trade and a UK election result. US credit spreads tightened by a meaningful 5 basis points following the news that President Trump agreed to cancel tariffs scheduled for December 15th and reduce existing tariffs after successful negotiation of the ’Phase 1’ trade deal. In the UK, the Conservative Party won a decisive majority, reducing uncertainty over Brexit and allowing some European credit spreads to tighten up to 10 bp. Central banks were also in the spotlight after the US Federal Reserve and European Central Bank left rates unchanged for December and guided toward steady rates through 2020. Despite the risk-on sentiment and less central bank intervention, global interest rates finished the week relatively unchanged.
Canadian credit spreads reached new tights for the year after narrowing 2-3 basis points on global headlines. While US & European primary markets were relatively quiet, Canadian issuers remained busy with $2.1 billion of fresh corporate bond supply. Telus led the way with a $1 billion two-tranche deal of 10-year and 30-year paper. The deal was heavily oversubscribed and finished the week 5 bp tighter. Year-to-date issuance in Canada now stands at $105 billion, 6% higher than last year’s total. We expect this week to be considerably quieter, with most issuers finished and traders starting to shut down their books for the balance of the year.