Resolving the Canadian credit conundrum?

Canadian corporate bond yields hit new lows in January, led by the decline in high yield, as the chart below shows. Since the Bank of Canada (BoC) announced its QE programme would include corporate bonds, in April 2020, yields have fallen steadily, despite the COVID pandemic and the deep contraction in the economy in 2020 (now forecast to be 5.5% by the BoC). 

Both high yield and investment grade credits are now at yields well below pre-COVID levels. Yields are also well below the levels seen in 2015/16, as we pointed out in a previous blog, Would you credit it? Canadian high yield and the anomaly with investment grade credit, FTSE Russell June 2020.

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