June 5, 2023

Fixed Income Insights (Canada) - June 2023

monthly report

Canadian bonds jolted as market re-focuses on pace of inflation decline

Canadian bond returns were mostly negative in May, not helped by an uptick in April inflation though the recent downtrend appears intact. Longer UK gilts were the worst performers, reflecting higher UK inflation. In contrast, Canadian HY, China and EM bonds outperformed, helped by China’s low inflation outlier status.

Key highlights:

  • Macro and policy backdrop – Modest uptick in inflation but lower wage growth may ease BoC concerns
  • Canadian governments and credit – Breakevens rose after inflation spike
  • Global yields and spreads – Yield curve inversion resumed. US spreads mostly widened on debt ceiling crisis
  • Sovereign and climate bonds – HY Green spreads edged out in May, reflecting surge in issuance in Q1
  • Performance – Duration became the investor’s enemy again in May, with UK gilts hardest hit

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.

Related reports

Subscribe to Market Maps reports

Get timely market analysis and commentary on what’s been happening across asset classes, regions, industries and styles.  You’ll receive your report(s) by email as soon as they are published.