Jason Ellis looks at new employment data, volatility and credit spreads

  • First National Financial LP

Good Morning.

It’s been a turbulent week in the markets, but before we explore that unsettled mess let’s take a moment to acknowledge the wonder and awe of the Winter Olympics. The opening ceremonies took place in PyeongChang this morning where North and South Korean athletes marched together.  It’s an Olympic miracle.  

Of course, hockey fans may be disappointed that NHL players won’t be participating in the Olympic tournament this year.  Personally, I’m more disappointed that Skijoring, a race in which skiers are pulled along by horses at great risk to athlete, horse and spectators alike, will not be a medal sport this year.  Skijoring, sadly, last featured in St Moritz at the 1928 games.  I’d like to see it.


According to data released this morning, Canadian employment fell by net 88,000 jobs in January.  It was the biggest monthly job loss since the last recession.  Of note, part-time jobs fell by 137,000 and full-time jobs actually increased by 49,000.  Probably no coincidence that the loss in part time work was concentrated in Ontario following the recent increase to the minimum wage.  5 year GoC bond prices jumped 8-10 cents (fell about 2 basis points) on the news.

When asked about the recent job losses and his hopes for employment, bystander Lloyd Dobler was quoted as saying “I don’t want to sell anything, buy anything, or process anything as a career.  I don’t want sell anything bought or processed, or buy anything sold or processed, or process anything sold, bought, or processed, or repair anything sold, bought, or processed.  As a career, I don’t want to do that.”  

I’ve got a career opportunity for Lloyd.  I’m looking for a Whiffler, somebody who walks in front of you through a crowd, waving a chain or an axe in order to clear your path.  I take the subway, and the older and grumpier I get; the more I need a Whiffler.  If you’re interested, send your resume over.


After the Dow fell 1,597 points (its biggest ever daily point decline) on Monday, the mood on Wall Street calmed a bit with a dramatic turnaround on Tuesday.  After sinking 567 points early in the day, the Dow ended with a GAIN of 567 points.  Alas, selling on Wednesday signaled that the rebound was a fragile one.  Of course, another 1,032 point drop yesterday marked a return to nervousness.   Major North American indices are up modestly in early trade today. 

There’s no single reason to explain the whiplash, but the downward move is largely attributable to the growing dread that rising interest rates will drag down economic growth.  The Dow has now fallen over 2,700 points (or 10%) from its all-time high of 26,616 on Jan 26th.  


The VIX is an index reported by the Chicago Board Options Exchange (CBOE) that reflects a market estimate of future volatility based on the average of the implied volatilities for a wide range of option strikes.  Simply put, it is the world’s premier barometer of investor fear and loathing.  On Monday, it registered its largest single day move when it surged 20 points and traded as high as 50, its highest level since August 2015.  The index is trading around 32 this morning.  For context the VIX spent most of 2017 trading around 10-12.  What does it mean?  It might mean it’s time to get out of the pool.

Credit Spreads

Not surprisingly, the market has taken ‘risk-off’ tone.  Credit spreads, including those on the highest quality bonds, are moving wider.  The IG29 Index (CDX North American Investment Grade Index) is composed of 125 equally weighted credit default swaps and is a useful reference point for the general tone of credit.  The IG29 Index is around 60 bps this morning…out 5 bps from yesterday and 15 bps since January 26th.  Domestic financials are all wider.  So are CMB’s and just about any other bond you can think of.  Blurg.

Other Stuff

Falcon Heavy, the most powerful rocket since the Saturn V sent astronauts to the moon, successfully sent Elon Musk’s personal Tesla Roadster into a solar orbit on Tuesday.  Musk was not overly confident before the test launch, suggesting the odds of the rocket exploding in a giant fireball were pretty high.  Either way, he promised a great show.  On board the Tesla was Bill Gates dressed in a spacesuit.

Finally, it’s been almost 37 years since we lost Bob Marley.  He would have turned 73 this week but his message remains timeless and particularly appropriate given the state of the markets today. 

“Woke up this morning, smile with the rising sun,
Three little birds, pitched by my doorstep
Singing sweet songs of melodies pure and true
Singing, this is my message to you…

Don’t worry, about thing, ‘cause every little thing gonna be all right”

Hang in there,
Treasury Guy