May 4, 2023

Fixed Income Insights (Canada) - May 2023

Monthly Report

Sweet spot for Canadian credit as inflation falls and BoC extends policy pause

Canadian government and corporate bonds rallied in April, buoyed by lower inflation and the BoC’s extended policy pause. Standout performance came from Canadian credit, led by the energy sector, though European credits also held up well, while long inflation-linked gilts registered heavy losses.

Key highlights:

  • Macro and policy backdrop – BoC paused policy on softer growth and inflation expectations
  • Canadian governments and credit – Canadian 7-10-year government spreads tighten vs G7 after policy pause
  • Global yields and spreads – Yields show further signs of a cyclical peak
  • Sovereign and climate bonds – Green bond issuance recovered strongly in Q1, spreads tightened
  • Performance – Canadian corporates outperformed across all industries and credit ratings

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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