General   |   May 10, 2021

Inflation and Interest Rates: What’s Next?

We subscribe to the lower-for-long thesis, however we would be remiss not to acknowledge the fixed income sell-off that began the year. Longer term rates were gradually moving higher in the latter half of 2020, but gained momentum as the year rolled-over and focus turned to policy rates normalizing sooner than expected. 

Charles Lefebvre
Vice President and Senior Portfolio Manager
Jason Carvalho
Senior Vice President, Fixed Income, Institutional Markets

To provide context, the 10-year Government of Canada (GoC) bond yield touched a brief low of 0.43% on August 4, 2020 before gradually rising to 0.68% on December 31, 2020. Over the first quarter of 2021, the 10-Year GoC yield climbed to 1.56%, a change of 0.88%. Over this period, the Bank of Canada has held its Overnight Policy Rate at 0.25% and has not diverged from its message that policy rates should be expected to be on hold until there is a clear path to a sustainable recovery. But the market seems to have a different view. 

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