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Highlights from the Week in Corporate Credit:
May 25 – May 29, 2020

Risk assets pushed higher despite a backdrop of rising civil unrest and US-China tensions. The S&P capped off a solid month with a weekly rally of over 3% while U.S. credit tightened by 8-10bp – higher-beta spreads as much as 30bp. For now, investors are content to ignore downside risks and focus on the relatively successful re-opening of the broad U.S. economy amid the broad array of fiscal and monetary support. A lighter week for bond issuance following the Memorial Day holiday also provided a technical tailwind for credit.

Canadian credit spreads mostly tracked the U.S. tighter with energy and auto spreads outperforming. The Bank of Canada commenced its corporate bond purchase program, however with spreads already rallying volumes were light.  Central banks appear content that markets are acting reasonably orderly and therefore don’t need to be aggressive in their buying; we expect they would buy more paper should sentiment turned negative. Two billion new C$ corporate bonds priced last week, concentrated in the energy sector with Pembina, Interpipe and Keyera, all bringing successful deals.  Eighteen billion of new issuance in the month means April and May are the two busiest months on record for Canadian corporate supply.