Canadian Bonds Rally

Prospects of peaking inflation and slower rate hikes have spurred a Canadian bond rally, says FTSE Russell’s Canada edition of its ‘Fixed Income Insights Report for December.’ It says November saw a significant change in investor sentiment as G7 government bond returns recovered strongly, reversing some of the deep year-to-date losses. Central banks signaled a slower pace of rate increases, led by the U.S. Fed, after lower inflation as global economic data deteriorated and the oil price fell. Weakening economic data, lower oil prices, more restrictive financial conditions, and inflation moving off its peak suggest a central pivot may be approaching. However, central banks remain cautious.