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Highlights from the Week in Corporate Credit:
May 13 – May 17, 2019

Trade rhetoric with China and growing tensions with Iran continued to dominate headlines last week, causing risk markets to lurch back and forth in response. Volatility was less pronounced than earlier in the month, and while we finished the week with moderately wider credit spreads, there is a sense the worst of the selling is behind us. Heightened tension in the Middle East pushed oil prices higher, which were supportive of the US energy sector spreads. It was a busy week for new bond issues with over $30 billion of corporate debt pricing. Spread concessions remain minimal, and after-market performance was mixed. The financial sector, in particular, appeared to be weighed down by hefty supply. Investment grade markets continue to enjoy above-average inflows as investors rotate out of stocks to lower-risk assets, which is providing overall support for credit spreads.

In Canada, supply remains light, which is keeping domestic credit markets positive in May despite falling interest rates and weaker international markets. The knock-on effect of surprisingly strong Canadian employment numbers released on May 10th continues to provide support. In an interview late Friday, governor Poloz cautioned against a presumption that rate cuts were inevitable, saying that the natural path of rates is higher once current headwinds dissipate. Canadian bond yields are opening 5-6bp higher this morning as a result.