January 04, 2024

Fixed Income Insights (Canada) - January 2024

Monthly report

Long Canadian Sovereigns, Municipals and Provincials make double digit returns in Q4

Long duration eventually proved the investor’s friend in 2023, after falling inflation and hints of a Fed pivot sharply reversed the direction of G7 yields. Yields ended December back at Q1, 2023 levels. Canadian long government bonds, municipal and provincial bonds took centre stage, with returns of up 16% in Q4.

Key highlights:

  • Macro and policy backdrop – The Fed pivot and Q4 disinflation fuelled expectations of BoC easing in 2024
  • Canadian governments and credit – Long governments, municipals and provincials gained up to 16% in the Q4 Canadian bond rally 
  • Global yields and spreads – Yield curves remained deeply inverted, after G7 curves bull flattened
  • Sovereign and climate bonds – Climate WGBI outperformed, helped by duration
  • Performance – Bunds and gilts performed best in Q4 

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.

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