Bond to Basics
Why fixed income has been and continues to be important in investor portfolios
— By the Active and Strategic Fixed Income team, Jean-Guy Mérette, Vice President and Portfolio Manager
Following a stellar performance in 2019 with Canadian universe bonds returning almost 7%, at the beginning of the year we were hearing some legitimate concerns that bonds might have lost their appeal — after all, yields were at historic lows, credit spreads were tight, and the North American economy was showing no signs of slowing down. Then COVID-19 happened and the bond market turned out to be one of the only asset classes to end the first quarter of 2020 in positive territory, mitigating double-digit equity losses in most balanced portfolios. Yet even in the wake of the significant drop in yields, we believe that an active Canadian universe bond strategy should still not be overlooked. Bonds have been a core holding for investor portfolios for over a century for good reason, and as an asset class, they should not be disregarded in the current market context.