About two weeks ago, Paul Brain decided the time had come to bet on Canada.
From his perch in London, Mr. Brain had weighed the step for months. Attracted by the country's comparative fiscal rectitude, he was looking for signals of economic strength to emanate from the bond market.
Once that happened, he and his team – who manage about $6-billion (U.S.) at Newton, an arm of Bank of New York Mellon Corp. – began plotting their move.
The object of their desire: the Canadian dollar. In a worldwide index that many global bond managers use as a benchmark, exposure to the currency is capped at about 1.5 per cent of the total. Mr. Brain doubled that figure and is looking to add even more.
He is one of a growing number of investors, including the world's largest bond manager, who see much to love north of the 49th parallel, particularly when compared to the neighbour to the south.
Canada is going to come much closer to a very stable debt dynamic very soon, whereas the U.S. won't for as far as the eye can see. — Scott Mather, Pimco's head of global portfolio management
Canada isn't burdened by an enormous debt load and a ballooning deficit, a hobbled financial sector and a gloomy housing market. The economy is starting to add jobs, not lose them. Plus it's plugged into the global trade in natural resources, with its current of demand from faster-growing developing economies like China.
To cash in, investors are betting first and foremost on more strength in the loonie, which they believe will hit parity with the greenback.
Depending on the investor, the wagers also include buying various types of Canadian debt.
These days, it's uncommon to hear a bad word spoken about investing in Canada.
At a lunch last week in midtown New York, David Rolley, who manages $27-billion in global bonds at Loomis Sayles & Co., told the assembled audience that the Canadian dollar is one of the firm's favoured currencies.
