April 08, 2024

Fixed Income Insights (Canada) - April 2024

Monthly report

Canadian HY tracks equities higher in Q1, as BoC cautions on easing

Canadian HY credit tracked equities higher in Q1 as investor risk appetite increased. The Bank of Canada cautioned on early easing, despite lower inflation and some easing in the labour market providing scope to pivot. Long government bonds reacted adversely to the “higher for longer” narrative. Yen weakness eroded JGB returns for Canadian investors.

Key highlights:

  • Macro and policy backdrop – Lower inflation provides scope for the BoC to pivot, but a sustainable fall required
  • Canadian governments – Long conventional bonds underperformed most in Q1
  • Canadian credit – Canadian investors switched to risk assets for returns
  • Global yields and spreads – G7 yield curves remain deeply inverted on “higher for longer” narrative
  • Sovereign and climate bonds – Regional weight differences drive Green WGBI versus WGBI relative performance
  • Performance – Global government bonds show lacklustre returns in March and Q1 as investors switched to riskier assets

This report provides actionable insights on currency-adjusted performance, macro drivers, shifts in yields, spreads and curves across conventional, inflation-linked and corporate bonds within the Canadian fixed income market.

For specialist content on a range of investment topics, including macroeconomic analysis and how it affects market performance and multi-asset analysis, viewed through our indices and data, explore our Global Investment Research hub.

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