Monthly report
Lower inflation raises possible BoC rate cut
G7 monetary and fiscal policy interdependencies are driving curve steepening, as investors in longs fret about issuance, while central banks ease rates. But LDI flows, and attractive levels may restrict the rise in long yields. Lower inflation opens the path to a possible BoC easing move, but much hinges on a trade deal. The USD is at risk from Fed easing, as the Fed shifts tack. Credit remains in a sweet spot, with HY out-performing and helped by the risk rally.
Key highlights:
- Macro and policy backdrop – Fed and BoE shift focus to growth, BoC mulls cut?
- Canadian governments – Curve steepening continues, led by longs
- Canadian credit – Credit remains in a sweet spot, helped by yield levels
- Global Yields, curves and spreads – US spreads tighten on easing hope. Curves steepen
- Performance – Weak dollar, strong Euro, long end weakness dominate YTD returns
From October 2025, we will be combining the US Fixed Income Insights and Canada Fixed Income Insights reports into a consolidated North America Fixed Income Insights edition. The new monthly North America edition will analyse the Global and North American macro backdrop, and cover the latest developments in the US and Canadian sovereign bond and credit markets.
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