Monthly report
Canadian longs readjust to higher rates, for even longer
The strength of US final sales and inflation surprised markets in April, pushing US yields higher, led by longs, pressuring Canadian yields, as investors revised rate expectations higher and rates remain on hold. The Canadian PMI also showed green shoots of recovery. HY credit gains show close correlation to risk assets, though with a modest April reversal.
Key highlights:
- Macro and policy backdrop – Resilient US growth diverges with the rest of the world, but for how long?
- Canadian governments – Canadian yield curve disinverted on higher rates for longer narrative
- Canadian credit – Canadian HY spreads narrowed a little in April after government yields backed up
- Global yields and spreads – Real yields were led higher by US Tips in April, as real US growth remained buoyant
- Sovereign and climate bonds – PAB continues to underperform Choice and ex fossil fuels indices
- Performance – Canadian high yield gains since January reflects low duration while long governments adjust to higher rates
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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