January 3, 2023

Fixed Income Insights (Canada Edition) - January 2023

monthly report

Bank of Canada (BoC) caution in December; early signs of a policy pivot?

The Bank of Canada’s December policy statement highlighted the stalling economy and decline in three-month core inflation, suggesting a pause in tightening. 2022 performance returns showed high grade credits held up well, with Canadian government bonds outperforming G7 peers, but still suffering negative returns.

Key highlights:

  • Growth and inflation expectations – BoC signals possible policy pause, but central bank caution remains in place
  • Canadian govts and credit – Canadian spreads tighten on possible BoC pivot
  • Global yields and spreads – Most G7 sovereign yields fell in Q4, despite the back-up in December
  • Performance – Long gilts, WGBI, Treasuries and inflation-linked bonds suffered deep losses in 2022 (in CAD)
  • Sovereign and climate bonds – Climate WGBI outperformed WGBI in Q4, despite losses in December

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.

Fixed Income Insights (Canada Edition) is part of a series of Market Maps reports, available by email as soon as they are published.

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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