July 4, 2023

Fixed Income Insights (Canada) - July 2023

monthly report

Canadian credits show resilience in Q2 despite surprise BoC rate hike

Canadian government bonds fell, with most G7 bonds, in the last three months as disinflation slowed and after the Bank of Canada’s surprise 0.25% rate rise, though inflation has now resumed its decline. Canadian credits still made modest gains in Q2. Canadian dollar strength reduced overseas returns in CAD terms.

Key highlights:

  • Macro and policy backdrop – BoC surprised with a 25bp hike, despite evidence of a slowdown, while Fed pauses
  • Canadian governments and credit – Structural flattening continues, but credit remains in sweet spot, despite recession fears
  • Global yields and spreads – G7 7-10yr government yields edged higher in June after central bank hikes
  • Sovereign and climate bonds – Sovereign re-weighting drives WGBI spreads tighter vs climate-WGBI
  • Performance – Most G7 government bonds fell a little in Q2 and YTD, on higher policy rates, but large FX moves a key factor

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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