As widely anticipated by the market and bank economists, the Bank of Canada increased the overnight policy rate to 1% from 0.50%. Importantly, the neutral rate is now believed to around 2.5%, higher than the previous economic cycle peak owing to more pervasive inflationary pressures.
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The Federal Canadian budget for March 2022/23 was tabled to the House of Commons. It was focused on making life more “affordable” for average Canadians, paid for by larger-than-expected tax revenues and the announcement of additional taxes on financial sector profits and a permanent increase in the corporate tax rate for large corporations.
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Senior Portfolio Manager Avi Hooper, from the Invesco Fixed Income (IFI) team, expects inflation to continue to be above target well into 2022. Find out why.
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Senior Portfolio Manager Avi Hooper from the Invesco Fixed Income (IFI) team shares his thoughts on the impact of the upcoming Canadian election.
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Invesco Senior Portfolio Manager Avi Hooper comments on the latest Bank of Canada announcement.
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Invesco Senior Portfolio Manager Avi Hooper shares the latest Bank of Canada announcement and the market reaction.
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Resurgence in demand for scarce resources contributing to a positive outlook for the Canadian dollar.
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As we live, work and invest, we must all become aware of the impact we have on the world and seek to improve our current way of life. Responsible investing means being thoughtful in how we allocate our assets to encourage countries and companies to set polices that promote overall improvement in the way we live. The consideration of environmental, social and governance (ESG) factors has become synonymous with leading this shift to responsible investing.
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The global financial crisis of 2008 has become a blueprint for how policymakers are acting today to smooth the negative growth and inflation shock from the ongoing health pandemic. Many global central banks have been forcefully pushing liquidity into markets to foster economic stability. Collapsing domestic demand and falling inflation has enabled an environment of co-operation between central banks and governments to ensure liquidity remains abundant and activity levels can be sustained without interruption.
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Canadian fixed income investors benefit from the one of the highest credit quality bond markets globally.1 In addition to the incremental yield captured by owning Provincial and Municipal debt, the corporate bond market is made up of well-managed investment grade rated issuers. Unfortunately for investors who choose to own the broadly followed Canadian Aggregate bond index, corporate debt only makes up 28% of the total.1
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Investors frequently focus on the yield to maturity that bonds pay, rather than recognizing the potential total returns that are available to global fixed income investors.
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Emerging market debt has evolved over the past few decades from a source of political and economic vulnerability to a potential positive driver of portfolio returns. The addition of new sovereign issuers (denominated in U.S. dollar and euro) has broadened the opportunity set for global investors, and corporate issuance has meaningfully contributed to its growth.
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Canadian companies continue to benefit from a strong earnings growth backdrop, especially in domestic facing sectors of the economy. Demand for new bond issuance remains exceptionally strong, highlighted by the recent all-time record number of buyers1 for a 10-year bond issued by Telus Corporation. In a world of a growing stock of negative-yielding debt, demand for high-quality, I believe positive-yielding bonds should continue to be well supported.
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The economic implications from an inverted yield curve may be overstated, in our view. Historically, when short-term interest rates, anchored by central bank policies, yield more than longer duration maturities the bond market is signaling that monetary policy has become restrictive. Taking on more interest rate risk in your portfolio for less yield to maturity is an unattractive option for investors.
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