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Invesco Canada blog

Insights, commentary and investing expertise

Invesco Fixed Income (IFI)

The Fed stays the course under its new leader


March 22, 2018
Subject | Institutional | Invesco | Invesco Fixed Income (IFI) | Macro views

The Federal Reserve (Fed) raised interest rates by a quarter of a percentage point as expected on Wednesday and signaled two more rate hikes for 2018. It also released its Summary of Economic Projections (SEP) for the next few years, which suggests that the Fed is optimistic regarding the future performance of the U.S. economy.

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Above-trend growth could cause U.S. inflation later in 2018


February 12, 2018
Subject | Institutional | Invesco | Invesco Fixed Income (IFI) | Macro views

Employment growth has been strong enough that the Bank of Canada (BOC) hiked its overnight target rate to 1.25% in January.1 The BOC statement attempted to balance the view that growth was near capacity with concerns that raising rates too quickly could cause the economic expansion to stall. The 10-year yield has broken through its previous peak of 2.15% on the growth story and a modest pickup in inflation.2 We believe yields should continue to move higher from these levels.

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What does market volatility mean for fixed income?


February 8, 2018
Subject | Active management | Institutional | Invesco | Invesco Fixed Income (IFI) | Macro views

Market expectations of inflation have risen in recent days, after signs of wage growth – often seen as a harbinger of inflation – appeared in the January jobs report. We at Invesco Fixed Income believe investor concerns that inflation is finally showing signs of life have helped drive interest rates higher and impacted credit markets, where worries over higher interest rates (and their potential impact on companies) have caused declines in stock markets and other risky assets.1

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A rising tide for fixed income?


February 7, 2018
Subject | Active management | Invesco | Invesco Fixed Income (IFI)

In my recent blog on the impact of the tax reform, I explained why I believe the new tax law should be extremely supportive of the U.S. investment grade (IG) bond market, including provisions that could lead to reduced supply. Looking beyond IG, the news appears to look good for other fixed income sectors as well.

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BoC hikes again, citing near-capacity growth


January 17, 2018
Subject | Invesco | Invesco Fixed Income (IFI) | Macro views

The Bank of Canada (BoC) announced today it was raising the target overnight rate by 0.25% to 1.25%. The last time the BoC hiked its target rate was at the September 6 meeting. Market expectations for this rate hike began to increase several weeks ago, so it was almost fully priced into the market.

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Tax reform: A year-end bonus for fixed income?


January 11, 2018
Subject | Active management | Invesco | Invesco Fixed Income (IFI)

Despite the near non-stop drama of the legislative process, we ended December with the U.S. Tax Cut and Jobs Act of 2017 being signed into law. What does this mean for fixed income investors? In my opinion, the news is overwhelmingly positive for the U.S. investment grade market; here are four reasons why.

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Fed maintains a slow and steady approach


December 14, 2017
Subject | Invesco | Invesco Fixed Income (IFI) | Macro views

The U.S. Federal Open Market Committee (the Fed) raised the target Fed Funds Rate by 0.25% to a range of 1.25%-1.50% at today’s meeting. This is the third rate hike this year, although the first one since the Fed announced it was reducing the size of its balance sheet at the September meeting.

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Interest rate outlook: Bank of Canada to pause


November 15, 2017
Subject | Active management | Institutional | Invesco | Invesco Fixed Income (IFI) | Macro views

After raising the target overnight rate 0.25 percentage points at each of the previous two meetings, the Bank of Canada (BoC) kept the rate unchanged at its meeting on October 25, 2017. While growth has remained strong, it has slowed from the second quarter and the BoC appears ready to give its two previous rate hikes time to filter through the economy before taking further action. Additional uncertainty around the breakdown in North American Free Trade Agreement trade negotiations leaves the BoC cautious regarding future hikes. The Canadian 10-year yield appears to have peaked for the moment and yields have several reasons to fall from current levels, in our view.

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Interest rate outlook: Bank of Canada likely to raise rate again


October 5, 2017
Subject | Active management | Institutional | Invesco | Invesco Fixed Income (IFI) | Macro views

The Bank of Canada (BoC) has hiked interest rates at two consecutive meetings, bringing the overnight benchmark rate to 1.00%.1 GDP growth and employment trends remain strong, while inflation has stayed below the BoC’s 2.0% target. The Canadian 10-year government bond yield has followed an upward trend after hitting its lows in the second quarter. We believe higher rates are likely.

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Fed balance sheet normalization at last


September 21, 2017
Subject | Institutional | Invesco Fixed Income (IFI) | Macro views

The U.S. Federal Open Market Committee (the Fed) held interest rates steady at Wednesday’s meeting, with a target range of 1% – 1.25%. After preparing the markets over the last several meetings, the Fed finally announced they would begin their long-awaited balance sheet reduction plans in October 2017.

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Fed balance sheet normalization at last

Interest rate outlook: BoC moves firmly into hawkish camp


September 15, 2017
Subject | Institutional | Invesco | Invesco Fixed Income (IFI) | Macro views

The Bank of Canada (BoC) has moved firmly into the hawkish camp, with a rate hike to 1% this month, leaving the market expecting one more rate hike this year. The benchmark rate was raised to 0.75% in July.1 Recent economic data continues to surprise to the upside.

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Surprise hike from hawkish BoC


September 6, 2017
Subject | Institutional | Invesco | Invesco Fixed Income (IFI) | Macro views

In a move that surprised the market, the Bank of Canada (BoC) hiked the target overnight rate to 1% at today’s monetary policy meeting. This is the second hike in a row for the BoC. The market was not expecting the next rate hike until the Bank’s October meeting.

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Currency outlook: CAD rally continues


September 1, 2017
Subject | Active management | Institutional | Invesco | Invesco Fixed Income (IFI)

The Canadian dollar has rallied significantly this year following the Bank of Canada’s (BoC) switch to a hawkish tilt. The combination of reasonably strong growth and the expressed intent of the BoC to remove both emergency rate cuts from 2015 left the market covering shorts in the Canadian dollar. The extreme rally has left the currency susceptible to a short-term retracement, in our view.

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Interest-rate outlook: Long-term U.S. rates now more dependent on global monetary policy


August 8, 2017
Subject | Active management | Institutional | Invesco | Invesco Fixed Income (IFI)

After hitting lows for the year in June, 10-year government bond yields rose to a two-year high of 1.89% in July,1 as the Bank of Canada (BoC) unsurprisingly increased its benchmark rate from 0.50% to 0.75%.2 The accompanying statement was upbeat as well, brushing off softer inflation numbers as temporary. The BoC’s optimism will probably keep the possibility of another rate hike alive at each of its upcoming meetings. We expect interest rates in Canada to rise from current levels, but we are looking for signs that rates may have topped out in the short term.

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Currency outlook: Strong global growth drives central bank policy convergence


August 4, 2017
Subject | Active management | Institutional | Invesco | Invesco Fixed Income (IFI)

The Canadian dollar has been in a slow decline over the last year. While the Bank of Canada increased the benchmark interest rate, as expected, by 0.25% (to 0.75%) at its July meeting, oil prices appear to have peaked for the year due to increased U.S. oil production, presenting a headwind for the currency.1 We are neutral on the Canadian dollar, and concerns about overleveraged Canadian consumers leave us looking for opportunities to short the currency.

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