Fixed Income Insights (Canada Edition) - September 2022

Global government bonds sold off in August, notably in long-dated maturities, as G7 central banks maintained their aggressive inflation-fighting stances and negated speculation of an imminent pivot, despite the risk of recession. Canadian high yield credits’ flat returns modestly outperformed negative returns elsewhere.

Growth and inflation expectations – Inflation control vs recession avoidance: Central banks’ juggling act Most G7 central banks, including the Bank of Canada, stayed united in their resolve to continue raising policy rates to tame inflation, despite the risk of a global recession.

Canadian govts and credit – Provincial spreads converged Provincial spreads vs their 7-10yr Canadian government bond peers have converged at about 65-67bp in August.

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