June 05, 2024

Fixed Income Insights (Canada) - June 2024

Monthly report

Long Canadian provinces outperform as rate cuts near

Improved inflation data helped Canadian long, corporate and real return bonds rally in May, as prospects of policy easing grew, and inflation approached target. Canadian provinces and municipals outperformed as investors capitalised on the extra yield pick-up, thereby reducing YTD losses. Canadian HY credit has gained 8% since January.

Key highlights:

  • Macro and policy backdrop – The ‘last mile’ to inflation target tempers timing of rate cut expectations
  • Canadian governments – Canadian government yields mirror US moves in May
  • Canadian credit – Canadian IG credit investors find extra yield pick-up in BBBs
  • Global yields and spreads – Curves renewed their inversion in 7-10 years in May
  • Sovereign and climate bonds – SI outperformance in 2024 partially reverses 2022-23
  • Performance – Canadian credit remains in a sweet spot 

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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