WHAT WE THINK…

 

WHAT WE THINK

“At the end of Q1 it appeared investors were convinced that bond yields were heading higher as the post-pandemic V-shaped rebound was in play and higher inflation was going to be a direct corollary. Not so fast… Q2 revealed that after the knee-jerk rebound in employment, further gains would be more difficult, supply constraints would hamper growth and, perhaps most importantly, the rest of the world would be lagging the US recovery. Yields treaded water for much of Q2, but in July the yield curve started flattening such that US long bond yields are over 50 basis points below their March peaks of 2.45%; Canadian yields peaked in May and the 30-year yield is now about 40 bps below its peak of 2.19%. Although Canadian yields have generally tracked US yields, the 5-30’s Government of Canada curve is about 30 bps flatter than the US Treasury curve.”

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Q2 2021

 

 

Lorica Focused Fixed Income

“Summer doldrums, pandemic exhaustion or simply well-balanced investor positioning – whatever the reasoning, Canadian and US bond markets continued their summer paralysis through August. Since mid-July, government and corporate yields in both countries have traded in very narrow ranges, with the deteriorating economic prospects having already contributed to the yield decline through the spring. The worsening COVID situation in the US and Canada, seems to have already been priced into the market, causing real yields to fall and Bank of Canada and Fed expectations to fade. The disappointing US nonfarm payroll number will likely take a September taper by the Fed off the table and provide them more time to see how debt ceiling and stimulus package negotiations progress. The market pricing for interest rate hikes from the BoC is also less aggressive than it was following the July interest rate announcement – December 2022 BA futures are pricing in 55 bps of hikes, compared with 70 bps in July.”

Read More→
August 2021 Commentary

 

Lorica Focused Corporate Bond

“Domestic investment grade credit spreads were flat over the month, having traded in a narrow 2 basis points range. Robust corporate earnings, low issuance and positive risk sentiment coming out of the Jackson Hole Symposium overshadowed concerns over the delta variant’s impact on economic and financial conditions. Afghanistan headlines added to volatility in the US credit markets, which at its height, saw high yield primary markets screech to a halt and forced deals to be shelved or issuers offer higher yields to entice investors. Corporate spreads and underlying Government of Canada yields both rose over the month (1 bps, and 3 bps respectively), but enough to wipe out low bond market yields, resulting in negligeable overall returns.”

Read More →
August 2021 Commentary

  

Lorica Short Term Bond

“Summer doldrums, pandemic exhaustion or simply well-balanced investor positioning – whatever the reasoning, Canadian and US bond markets continued their summer paralysis through August. Since mid-July, government and corporate yields in both countries have traded in very narrow ranges, with the deteriorating economic prospects having already contributed to the yield decline through the spring. The worsening COVID situation in the US and Canada, seems to have already been priced into the market, causing real yields to fall and Bank of Canada and Fed expectations to fade. The disappointing US nonfarm payroll number will likely take a September taper by the Fed off the table and provide them more time to see how debt ceiling and stimulus package negotiations progress. The market pricing for interest rate hikes from the BoC is also less aggressive than it was following the July interest rate announcement – December 2022 BA futures are pricing in 55 bps of hikes, compared with 70 bps in July.”

Read More →
August 2021 Commentary

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

SHORT TERM

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

WHAT WE THINK…

 

WHAT WE THINK

“At the end of Q1 it appeared investors were convinced that bond yields were heading higher as the post-pandemic V-shaped rebound was in play and higher inflation was going to be a direct corollary. Not so fast… Q2 revealed that after the knee-jerk rebound in employment, further gains would be more difficult, supply constraints would hamper growth and, perhaps most importantly, the rest of the world would be lagging the US recovery. Yields treaded water for much of Q2, but in July the yield curve started flattening such that US long bond yields are over 50 basis points below their March peaks of 2.45%; Canadian yields peaked in May and the 30-year yield is now about 40 bps below its peak of 2.19%. Although Canadian yields have generally tracked US yields, the 5-30’s Government of Canada curve is about 30 bps flatter than the US Treasury curve.”

Read More→
Q2 2021

 

 

Lorica Focused Fixed Income

“Summer doldrums, pandemic exhaustion or simply well-balanced investor positioning – whatever the reasoning, Canadian and US bond markets continued their summer paralysis through August. Since mid-July, government and corporate yields in both countries have traded in very narrow ranges, with the deteriorating economic prospects having already contributed to the yield decline through the spring. The worsening COVID situation in the US and Canada, seems to have already been priced into the market, causing real yields to fall and Bank of Canada and Fed expectations to fade. The disappointing US nonfarm payroll number will likely take a September taper by the Fed off the table and provide them more time to see how debt ceiling and stimulus package negotiations progress. The market pricing for interest rate hikes from the BoC is also less aggressive than it was following the July interest rate announcement – December 2022 BA futures are pricing in 55 bps of hikes, compared with 70 bps in July.”

Read More→
August 2021 Commentary

 

Lorica Focused Corporate Bond

“Domestic investment grade credit spreads were flat over the month, having traded in a narrow 2 basis points range. Robust corporate earnings, low issuance and positive risk sentiment coming out of the Jackson Hole Symposium overshadowed concerns over the delta variant’s impact on economic and financial conditions. Afghanistan headlines added to volatility in the US credit markets, which at its height, saw high yield primary markets screech to a halt and forced deals to be shelved or issuers offer higher yields to entice investors. Corporate spreads and underlying Government of Canada yields both rose over the month (1 bps, and 3 bps respectively), but enough to wipe out low bond market yields, resulting in negligeable overall returns.”

Read More →
August 2021 Commentary

  

Lorica Short Term Bond

“Summer doldrums, pandemic exhaustion or simply well-balanced investor positioning – whatever the reasoning, Canadian and US bond markets continued their summer paralysis through August. Since mid-July, government and corporate yields in both countries have traded in very narrow ranges, with the deteriorating economic prospects having already contributed to the yield decline through the spring. The worsening COVID situation in the US and Canada, seems to have already been priced into the market, causing real yields to fall and Bank of Canada and Fed expectations to fade. The disappointing US nonfarm payroll number will likely take a September taper by the Fed off the table and provide them more time to see how debt ceiling and stimulus package negotiations progress. The market pricing for interest rate hikes from the BoC is also less aggressive than it was following the July interest rate announcement – December 2022 BA futures are pricing in 55 bps of hikes, compared with 70 bps in July.”

Read More →
August 2021 Commentary

WHAT WE THINK…
▸2021
▸2020
▸2019
▸2018
▸2017
▸2016
▸2015
▸2014
▸2013
▸2012
▸2011
Q4
Q3
Q2
FOCUSED FIXED INCOME
▸2020
▸2019
▸2018
▸2017
▸2016
▸2015
▸2014
▸2013
▸2012
▸2011
FOCUSED CORPORATE BOND
▸2020
▸2019
▸2018
▸2017
▸2016
▸2015
▸2014
▸2013
▸2012
▸2011

SHORT TERM

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