Hank Cunningham is a fixed income strategist with Odlum Brown.
The outlook is dominated by the events in Europe as there has been a huge safe haven bid in North American bond markets, driving yields to historic lows. In addition, the U.S. economy is in a soft patch and inflation has been ebbing. Thus, money market and bond yields will remain low. We expect that the U.S. economy will emerge from this soft patch in the second half of the year.
Of late, the euro authorities are displaying increased concern and determination to come to grips with the debt crisis. Should they implement strong measures and gain credibility, there would be some reversal in the flight-to-quality thereby producing mild upward pressure on bond yields in North America.
Past Picks: November 28, 2011
Brookfield Asset Management 5.29 per cent 04/25/2017
TR: +5.67 per cent
Just Energy Convertible 6 per cent 06/30/2017
TR:+0.05 per cent
BMO Emerging Market Bond ETF
TR: +12.77 per cent
Total Return Average: +6.13 per cent
Province of Ontario 3.15 per cent 06/02/2022
I bought the Ontarios as insurance for yields falling further because of the Euro crisis. They have rallied almost a full point since buying them.
iShares U.S. High Yield Bond Index Fund (CAD-Hedged)
XHY has been a long time favourite. It invests in the U.S. High Yield market and is hedged to CAD
TransAlta 6.40 per cent 11/18/2019
These debentures have fallen sharply over a possible downgrade. At 340 basis points over Canadas, they offer attractive yield.
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Companies & investments Mentioned In This Article (2)
XHY-T 21.55 -0.139 % 23,733 BMO Emerg Mkts Bond Hedged CAD
ZEF-T 16.11 -0.309 % 30,694