January 8, 2018 | By Hank Cunningham
Performance was negative in all sectors of the bond market in December, except for real return and high yield bonds. For the year, provincials, “A” corporates and high yield bonds led the way. Canadian yields rose by more than their U.S. counterparts in December.
December’s bond market action featured one more hike in the Federal Funds Rate by the Federal Reserve. This came after further evidence of solid economic growth, emanating from the employment and housing markets, plus buoyant consumer confidence. As well, global growth continued to pick up and the European Central Bank signaled a halving in its massive quantitative easing program. For the month, U.S. three month bills gained twelve basis points, two-year yields gained eleven basis points, while the yield on the ten-year bond was unchanged. This flattened the yield curve further, putting the two-year/ten-year spread at a mere fifty-two basis points.