Financial markets, including bonds, stabilized in April following the chaotic action of March. Riskier assets, including equities, preferred shares, corporate bonds, and even provincial bonds rebounded from the near-panic valuations of the previous month. Volatility, though still elevated, was much reduced. Global central banks, including the Bank of Canada, introduced programmes to improve bond market liquidity and lower borrowing costs as both governments and corporations struggled with the incipient recession. Canada’s economy was further battered by the continued plunge in oil prices that one day in April hit negative levels as demand for gasoline and jet fuel collapsed. However, yield spreads for most corporate and provincial bonds narrowed sharply even as the severity of the economic slowdown was gradually being realized. While many people hoped that physical distancing measures would soon be lifted and economies restarted, most jurisdictions in the world were still struggling to contain the spread of the COVID-19 virus during April. The FTSE Canada Universe Bond index returned 3.79% in April.

Canadian economic data received during April was primarily about February, but some statistics gave an indication of the sharp decline in activity that began in mid-March. Among the latter, the unemployment rate jumped to 7.8% from 5.6%, as over a million jobs were lost in the month. The rise in unemployment would have been higher but some workers withdrew from the labour force and consequently the participation rate fell from 65.5% to 63.5%. In addition, Canadian GDP was estimated to have fallen at an annual rate of 10% in the first quarter, with the vast majority of the decline occurring in March, although rail blockades and Ontario teacher strikes dampened activity in February. Inflation declined to 0.9% from 2.2% the previous month, with the plunge in gasoline prices causing the majority of the drop. Core prices only edged down to 1.8% from 2.0%.

In the United States, the economic statistics were also a blend of pre and post pandemic measures. The unemployment rate, which used data from early March, rose to 4.4% from 3.5%, but seems destined to move sharply higher as 30 million Americans have filed for unemployment benefits in the last six weeks. U.S. GDP shrank at a 4.8% pace in first quarter, and personal consumption fell 7.8% p.a.

Internationally, there was also economic gloom. In Europe, first quarter GDP fell at a 14.8% pace, with France, Spain, and Italy experiencing particularly sharp declines due to lockdowns imposed to stem the pandemic. In China, factories that had restarted in March following the February lockdown found that both domestic consumption and export demand were disappointing.

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