Long duration bonds rebounded for fixed income investors in 2023

The final three months of 2023 proved successful for investors in Canadian long government bonds, municipal and provincial bonds according to a new report.

FTSE Russell’s latest Fixed Income Insights report found that, with inflation easing and signs that the Fed is ready to pivot on rates, G7 yields reversed and ended December back at levels seen at the start of 2023, erasing 12 months of yield rises, as median Fed dot plots show 75bp in cuts for 2024.

Investors in long Canadian sovereigns, provis, and munis saw returns of up to 16% in the fourth quarter as the Canadian curve continued to disinvert in December with 20-year bond yields down sharply on expectations of aggressive rate cuts, despite the Bank of Canada caution on its rate policy.

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