Fixed Income   |   Dec 19, 2019


It might be surprising to some bond investors that Quebec municipalities cannot run deficits, and generally issue debt under only two scenarios:

  1. To refinance existing debt
  2. To fund infrastructure projects to improve services to its population.
Jean-Guy Mérette
Portfolio Manager, Fixed Income

In late 2015, the Liberal Party was elected with a plan to nearly double federal infrastructure investments over the following decade. “Every dollar we spend on public infrastructure grows our economy, creates jobs, and strengthens our cities and towns,” said Justin Trudeau during his 2015 election campaign. This commitment was particularly important for the Quebec municipal bond market as government money was only partially covering these new infrastructure projects and municipalities had to issue debt to cover the balance of the costs. Consequently, Quebec municipal bond total issuance has risen each year since 2017.

There’s an old saying in the bond world: “supply creates demand.” This is exactly what happened in 2019 for Quebec municipal bonds – total issuance reached an all-time high of $3.7 billion while investors hungry for that debt pushed spreads over provincial bonds down significantly. Thanks to all the issuance, liquidity was higher this year than what we’ve seen in recent years, allowing for tactical allocations in bond portfolios. We were particularly active with Quebec non-rated municipal bonds, strategically increasing our holdings in Q1 at wider spreads and cashing them in Q3 while reinvesting all of our maturities. We’re not here to talk politics, but the recent Liberal Party win could be a tailwind for Quebec municipal bonds going forward.


Related Insights

Market Update by Candice Bangsund
Aug 5, 2022

Global Asset Allocation Team Market Update – August 2022

The mood in the market improved in July amid speculation that a slowing global economy will prompt central banks to pivot their focus and cool the scale of rate hikes to tame decades-high inflation, which sparked a rally in both stocks and bonds.
Jean-Guy Desjardins
Executive Chairman of the Board
Candice Bangsund
Vice President and Portfolio Manager, Global Asset Allocation
Fiera Capital Fixed Income Monthly Monitor Insight Image
Fixed Income
Jul 21, 2022

Fixed Income Monthly Monitor – July 2022

The FTSE Canada Universe Bond Index returned negative 2.18% on the month.
Fiera Capital Private Wealth Canadian Yield Curve Overview Jean-Guy Mérette
Fixed Income
Mar 29, 2021

Canadian Yield Curve Overview

Description: Jean-Guy Mérette, Vice President and Portfolio Manager, Active and Strategic Fixed Income Team, talks about the Canadian yield curve, and shares the team's strategy to navigate this environment.
Jean-Guy Mérette
Portfolio Manager, Fixed Income
Fiera Capital from the bond desk
Fixed Income
Feb 15, 2021

Is the Bond Market Getting Ahead of Itself?

The shape of the yield curve has changed significantly over the past six months.
Jean-Guy Mérette
Portfolio Manager, Fixed Income