July 05, 2024

Fixed Income Insights (Canada) - July 2024

Monthly report

Canadian short governments and credits lifted by BoC easing

Short governments and credits benefited from lower inflation expectations and the BoC easing in June, even if an uptick in inflation reduced prospects for more imminent cuts, with a gradualist approach to easing likely. HY credit has outperformed since January, but valuations appear stretched. Canadian Provinces have recovered from YTD losses in Q2.

Key highlights:

  • Macro and policy backdrop – BoC initiates G7 easing cycle but US inflation delays Fed
  • Canadian governments – Canadian government bonds benefit as easing expectations intensify
  • Canadian credit –  Is the party over for Canadian HY? 
  • Global yields and spreads – Signs of curve dis-inversion as easing cycle begins
  • Sovereign and climate bonds – Duration continues to dominate narrative 
  • Performance – Shorts outperformed in Q2, helped by coupon effects

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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