December 8, 2017 | By Hank Cunningham
Performance was positive in all sectors of the bond market in November with provincial bonds leading the way. The provincial index has a longer duration than the other indices and thus benefited from the yield curve flattening.
While U.S. yields rose in November, Canadian yields fell for the second straight month and Canadian bonds outperformed their U.S. counterparts. The yield curves in both countries flattened further; this meant that longer-dated bonds outperformed short- and mid-term bonds.
November’s bond market action was dominated by the political arena and the constant back and forth on the proposed tax bill and the consequences for the economy, inflation and bond yields. The bellwether U.S. ten-year note rose a net four basis points while trading in a tight range. Two-year yields rose by twenty basis points, flattening the yield curve further.
The global economic picture brightened further with the OECD now forecasting GDP at 3.6% for the next twelve months.