Monthly report
Strong recovery in Canadian HY credit in May
Financial markets responded to tariff news again in May, and uncertainty still weighs on consumer and business sentiment. Conventional and corporate bonds recovered in May, erasing April losses. Credit outperformed, notably Canadian HY and BBB IG corporates, despite the BoC pausing policy in May. The weak yen and auction squeezed JGBs returns.
Key highlights:
- Macro and policy backdrop – Strong Q1 growth not expected to last
- Canadian governments – Canadian yield curve bear steepens in May
- Canadian credit – Risk-on rally drives Canadian credit spreads lower
- Global yields and spreads – Mixture of bull and bear curve steepening, led by JGBs
- Sovereign and climate bonds – ESG WGBI has a higher quality bias versus WGBI
- Performance – Longs sell-off as risk-rally weighs on government bonds
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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