WHAT WE THINK…

 

Inflation and Central Banks

“In response to deflationary pressures that North American economies were experiencing over the decade prior to the pandemic, both the Fed and the Bank of Canada enhanced their monetary policy frameworks by adding flexibility around inflation targeting and their gauges of unemployment. The Fed was the first to announce changes, when Fed Chair Powell introduced flexible average inflation targeting and continued the retreat from hard employment goals. In 2021, Bank Governor Macklem delivered similar changes for the BoC, indicating that the Bank would utilize the full flexibility inherent in its inflation target range and rely on a variety of labour market factors to pursue full employment. The net of these changes was that both central banks were formally permitting themselves more flexibility around how they would respond to inflation and tight labour markets. In hindsight, at the very worst time.”

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What We Think…Inflation and Central Banks

 

 

Lorica Focused Fixed Income

“After the relentless backup of bond yields that began in last Q4, we finally got some relief this Q4. Yields continued their rise through October, but the Bank of Canada’s pivot to a smaller rate hike following its early December meeting was taken by both Canadian and US investors as a buying signal. Yields subsequently declined until, for what at first seemed like a positive sprint to year-end but what turned out to be, a fade in mid-December and a negative limp to New Years. Government of Canada yields finished the quarter higher than where they began – 2, 5, 10 and 30-year yields by 26, 8, 13 and 18 basis points, respectively. Corporate yields fared better, as corporate yield spreads narrowed from their widest levels at the end of October to finish the quarter averaging 10, 12 and 9 bps tighter for short, mid and longs.”

Read More→
December 2022 Commentary

 

Lorica Focused Corporate Bond

“Domestic credit markets were under pressure through October as rate volatility, monetary policy uncertainty and declining liquidity going into bank year-end bruised market sentiment. Credit yield spreads reacted by widening to their highest levels since the pandemic peak. Credit rallied thereafter as Fed communication was indicative of a more imminent pivot in policy and reversal of interest rates. The reduced upward pressure on yields, coincided with attractive corporate bond yields, better-than-expected earnings reports and improved investor sentiment. Amidst this backdrop, primary issuance was robust and lower-rated, higher-beta debt outperformed with the spread differential between BBB and A rated debt retracing earlier widening.”

Read More →
December 2022 Commentary

  

Lorica Short Term Bond

“After the relentless backup of bond yields that began in last Q4, we finally got some relief this Q4. Yields continued their rise through October, but the Bank of Canada’s pivot to a smaller rate hike following its early December meeting was taken by both Canadian and US investors as a buying signal. Yields subsequently declined until, for what at first seemed like a positive sprint to year-end but what turned out to be, a fade in mid-December and a negative limp to New Years. Short-term Government of Canada yields finished the quarter higher by 55, 26, 13 and 13 basis points for one, two, three and five years, respectively. The FTSE Canada Short-Term Index ended the quarter with a 0.67% return versus 0.10% for the FTSE Canada Universe. The index lost -0.15% in December, reversing the 0.88% November gain. Short-term corporate and provincial bonds fared better, with corporate and provincial yield spreads narrowing from their widest levels at the end of October to finish the quarter an average of 10 and 3 bps tighter, respectively.”

Read More →
December 2022 Commentary

WHAT WE THINK…
▸2022
▸2021
▸2020
▸2019
▸2018
▸2017
▸2016
▸2015
▸2014
▸2013
▸2012
▸2011
 
 
FOCUSED FIXED INCOME
▸2021
▸2020
▸2019
▸2018
▸2017
▸2016
▸2015
▸2014
▸2013
▸2012
▸2011
FOCUSED CORPORATE BOND
▸2021
▸2020
▸2019
▸2018
▸2017
▸2016
▸2015
▸2014
▸2013
▸2012
▸2011

SHORT TERM

▸2021
▸2020
▸2019
▸2018
▸2017
▸2016
▸2015
▸2014

WHAT WE THINK…

 

Inflation and Central Banks

“In response to deflationary pressures that North American economies were experiencing over the decade prior to the pandemic, both the Fed and the Bank of Canada enhanced their monetary policy frameworks by adding flexibility around inflation targeting and their gauges of unemployment. The Fed was the first to announce changes, when Fed Chair Powell introduced flexible average inflation targeting and continued the retreat from hard employment goals. In 2021, Bank Governor Macklem delivered similar changes for the BoC, indicating that the Bank would utilize the full flexibility inherent in its inflation target range and rely on a variety of labour market factors to pursue full employment. The net of these changes was that both central banks were formally permitting themselves more flexibility around how they would respond to inflation and tight labour markets. In hindsight, at the very worst time.”

Read More→
What We Think…Inflation and Central Banks

 

 

Lorica Focused Fixed Income

“After the relentless backup of bond yields that began in last Q4, we finally got some relief this Q4. Yields continued their rise through October, but the Bank of Canada’s pivot to a smaller rate hike following its early December meeting was taken by both Canadian and US investors as a buying signal. Yields subsequently declined until, for what at first seemed like a positive sprint to year-end but what turned out to be, a fade in mid-December and a negative limp to New Years. Government of Canada yields finished the quarter higher than where they began – 2, 5, 10 and 30-year yields by 26, 8, 13 and 18 basis points, respectively. Corporate yields fared better, as corporate yield spreads narrowed from their widest levels at the end of October to finish the quarter averaging 10, 12 and 9 bps tighter for short, mid and longs.”

Read More→
December 2022 Commentary

 

Lorica Focused Corporate Bond

“Domestic credit markets were under pressure through October as rate volatility, monetary policy uncertainty and declining liquidity going into bank year-end bruised market sentiment. Credit yield spreads reacted by widening to their highest levels since the pandemic peak. Credit rallied thereafter as Fed communication was indicative of a more imminent pivot in policy and reversal of interest rates. The reduced upward pressure on yields, coincided with attractive corporate bond yields, better-than-expected earnings reports and improved investor sentiment. Amidst this backdrop, primary issuance was robust and lower-rated, higher-beta debt outperformed with the spread differential between BBB and A rated debt retracing earlier widening.”

Read More →
December 2022 Commentary

  

Lorica Short Term Bond

“After the relentless backup of bond yields that began in last Q4, we finally got some relief this Q4. Yields continued their rise through October, but the Bank of Canada’s pivot to a smaller rate hike following its early December meeting was taken by both Canadian and US investors as a buying signal. Yields subsequently declined until, for what at first seemed like a positive sprint to year-end but what turned out to be, a fade in mid-December and a negative limp to New Years. Short-term Government of Canada yields finished the quarter higher by 55, 26, 13 and 13 basis points for one, two, three and five years, respectively. The FTSE Canada Short-Term Index ended the quarter with a 0.67% return versus 0.10% for the FTSE Canada Universe. The index lost -0.15% in December, reversing the 0.88% November gain. Short-term corporate and provincial bonds fared better, with corporate and provincial yield spreads narrowing from their widest levels at the end of October to finish the quarter an average of 10 and 3 bps tighter, respectively.”

Read More →
December 2022 Commentary

WHAT WE THINK…
▸2022
▸2021
▸2020
▸2019
▸2018
▸2017
▸2016
▸2015
▸2014
▸2013
▸2012
▸2011
 
 
FOCUSED FIXED INCOME
▸2021
▸2020
▸2019
▸2018
▸2017
▸2016
▸2015
▸2014
▸2013
▸2012
▸2011
FOCUSED CORPORATE BOND
▸2021
▸2020
▸2019
▸2018
▸2017
▸2016
▸2015
▸2014
▸2013
▸2012
▸2011

SHORT TERM

▸2021
▸2020
▸2019
▸2018
▸2017
▸2016
▸2015
▸2014