Monthly report
Canadian HY tracks equities higher in Q1, as BoC cautions on easing
Canadian HY credit tracked equities higher in Q1 as investor risk appetite increased. The Bank of Canada cautioned on early easing, despite lower inflation and some easing in the labour market providing scope to pivot. Long government bonds reacted adversely to the “higher for longer” narrative. Yen weakness eroded JGB returns for Canadian investors.
Key highlights:
- Macro and policy backdrop – Lower inflation provides scope for the BoC to pivot, but a sustainable fall required
- Canadian governments – Long conventional bonds underperformed most in Q1
- Canadian credit – Canadian investors switched to risk assets for returns
- Global yields and spreads – G7 yield curves remain deeply inverted on “higher for longer” narrative
- Sovereign and climate bonds – Regional weight differences drive Green WGBI versus WGBI relative performance
- Performance – Global government bonds show lacklustre returns in March and Q1 as investors switched to riskier assets
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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