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Daily Pulse


Air Canada suspended its financial guidance for the first quarter and full year, citing the grounding of Boeing Co.’s 737 Max and the planemaker’s suspension of deliveries. The Montreal-based carrier said is continuing to develop a contingency plan to address the situation and will provide updates. Certain forecasts for the next two years remain in place.

Bombardier Inc. is extending the duration of its debt and bolstering liquidity as the Canadian manufacturer of planes and trains moves ahead with a turnaround plan. On top of canceling $850 million of its 7.75 percent bonds due 2020, investors of $778.5 million of bonds due in 2021 have accepted the tender offer so far for their securities, according to regulatory filings on March 7 and March 14. That compares with $2 billion that the Montreal-based company raised in eight-year securities on Feb. 28. Bombardier is managing its liabilities after reporting improved free cash flow in the last three months of 2018, exceeding analyst estimates and boosting optimism that the company can tame its $9.1 billion of debt. Chief Executive Officer Alain Bellemare is seeking to regain investor confidence as his company enters the fourth year of a five-year turnaround plan.

The Bank of Canada is diversifying its balance sheet by adding government-backed mortgage bonds just as the housing market is showing increased signs of a slowdown. The central bank bought C$250 million ($187 million) of Canadian Housing Trust’s C$5.5 billion sale of 2.9 percent bonds due 2024, said Canadian Imperial Bank of Commerce, lead coordinator of the deal. It’s the secondpurchase of such debt since November when the central bank added the federal agency’s bonds in its operations to manage its balance sheet. Canadian home values fell nationwide last year for the first time since at least1990, led by declines in Toronto and Vancouver, even as debt burdens increased, according to government data released Thursday. The value of residential real estate in Canada held by households dropped 0.6 percent in the fourth quarter to C$5.10 trillion from the same quarter the previous year


Investors seem reluctant to buy the weakest high-yield corporate securities, a potential signal of trouble ahead, according to Citigroup Inc. strategists. Ratings firms are downgrading speculative-grade companies at the fastest rate relative to upgrades since the start of 2016, according to data compiled by Bloomberg. And to sell their bonds, a handful of issuers including Scientific Games International Inc. have had to pay higher yields this month than dealers had expected. For now, many investors are shrugging off those concerns. Junk bonds have reached record highs this year and are the best performing U.S. fixed-income sector, gaining more than 6.4 percent through Wednesday. A Bank of America Corp. survey of U.S. credit-fund managers found the lowest level of alarm about high-yield and investment-grade corporate bonds since 2014.


The euro zone’s largest economy is faltering and its political situation is as unsettled as ever, and yet European equities are among the hottest things in financial markets. Consider Thursday, when the STOXX Europe 600 Index jumped 0.78 percent as the MSCI All-Country World Index was little changed. That’s not just a one-hit wonder: the Europe index has o utperformed the global market since the end of January, gaining 5.53 percent to the MSCI’s 2.86 percent increase. The cynics would say this is solely due to the European Central Bank’s dovish turn, but that only happened last week. The outperformance of European stocks has been fairly consistent over the past six weeks. At its core, the rally seems to reflect the growing notion that Europe’s economy, which slowed before much of the rest of the world last year, may have bottomed. Italy looks to be exiting a recession, France is looking up and Spain is starting to hum. And a slew of industrial production figures over the past week or so in Europe came in better than forecast.


China will stick to its current targeted economic support strategy and resist the temptation to engage in large-scale stimulus like quantitative easing or a massive expansion in public spending, Premier Li Keqiang said. “We certainly need to take strong measures to face the downward pressure,” Li told a news conference Friday at the close of the annual National People’s Congress session in Beijing. “An indiscriminate approach may work in the short run but may lead to future problems. Thus it’s not a viable option. Our choice is to energize market players.”

Bank of Japan Governor Haruhiko Kuroda joined other global central bankers Friday in roundly rejecting Modern Monetary Theory’s downplaying of government debt, calling it an extreme idea that doesn’t enjoy widespread support. Kuroda aligned himself with Federal Reserve and European Central Bankofficials by saying policy makers simply can’t ignore the risks of debt as they focus on stabilizing economic growth.

The author

Michel Doucet

Michel Doucet

Vice-President and Portfolio Manager
After obtaining a Bachelor's degree from the Faculty of Social Sciences at the Université du Québec in Montréal and his Master’s degree, Michel Doucet began his career as a junior economist at the National Bank head office in Montreal. In 1992 he joined the institutional equities and fixed income group at Lévesque Beaubien Geoffrion as an economist and market analyst. Over the years, he has led various projects related to the North American and international economies as well as Canadian public finances. In 1996, the team of institutional economists to which he belongs was ranked first in Canada by Brendan Wood International. In August 1997, Mr. Doucet joined the personal services division of Lévesque Beaubien Geoffrion where he served as an economist, fixed income market analyst and vice president. In 2004, he joined the Desjardins Securities full service team as Vice President. He now occupies the roles of fixed income strategist, economist and portfolio manager. He manages the Securities Portfolio Advisory Group, advisor marketing and distribution of financial planning and insurance.