Page 8 Fixed Income Quarterly—Benchmark Barometer
Table 5.1: FTSE TMX Canada (formerly DEX) Universe Bond Index Total Return and Spread – Provincials
Short
Mid
Long
Broad
Sector
Return
Spread (bps)
Return
Spread (bps)
Return
Spread (bps)
Return
Spread (bps)
MoM
YTD
MoM
YTD
MoM
YTD
MoM
YTD
MoM
YTD
MoM
YTD
MoM
YTD
MoM
YTD
Provincials
-0.07%
1.14%
0.56
1.12
-0.39%
2.97%
2.74
5.14
-0.72%
4.76%
3.32
1.48
-0.48%
3.42%
2.92
3.59
Alberta
British Columbia Manitoba
New Brunswick Newfoundland
Nova Scotia
Ontario
Prince Edward Island Quebec Saskatchewan
-0.05% -0.22% -0.06% -0.05% -0.02% 0.00% -0.06% 0.10% -0.08% -0.05%
1.03% 1.78% 1.11% 0.94% 0.79% 0.47% 1.13% 0.49% 1.19% 0.70%
-0.35 0.47 -0.37 -0.33 -0.59 -0.38 1.59 -2.90 -0.34 4.13
1.71 0.82 0.39 0.11 1.66 4.67 0.29 -4.15 2.36 4.85
-0.47% -0.46% -0.41% -0.42% -0.40% -0.47% -0.41% -0.34% -0.32% -0.36%
3.11% 2.87% 2.89% 2.72% 2.55% 2.49% 3.06% 2.56% 2.92% 2.60%
3.59 5.02 3.19 3.02 2.07 3.57 2.72 2.38 1.55 2.05
5.00 7.29 5.13 5.72 4.29 6.42 3.81 3.80 5.92 4.61
-0.90% -0.87% -0.76% -0.83% -0.81% -0.90% -0.73% -0.85% -0.59% -0.83%
4.77% 4.69% 4.87% 4.73% 4.33% 5.20% 4.85% 4.95% 4.62% 4.72%
3.03 4.42 3.58 4.52 4.61 3.80 3.42 3.91 2.57 4.07
1.25 2.34 0.89 1.56 2.67 1.38 0.33 0.82 3.28 1.79
-0.44% -0.65% -0.51% -0.55% -0.72% -0.74% -0.48% -0.72% -0.39% -0.73%
2.70% 3.75% 3.40% 3.24% 3.90% 4.12% 3.45% 4.33% 3.29% 4.10%
2.80 3.25 2.68 2.95 3.94 3.50 3.88 3.29 1.52 2.12
3.97 3.22 2.94 5.26 2.91 5.53 2.94 1.33 4.71 1.68
Source: PCBond, a business unit of TSX Inc., BMO Capital Markets
Chart 5.1: FTSE TMX Canada (formerly DEX) Universe Bond Index Ranked Monthly Total Return – Provincials
Chart 5.2: FTSE TMX Canada (formerly DEX) Universe Bond Index Ranked Monthly Spread – Provincials
Quebec Alberta Ontario
-0.39% -0.44%
-0.48%
-0.48% -0.51%
-0.55% -0.65%
Provincials Overall Manitoba New Brunswick British Columbia Newfoundland
-0.72% Prince Edward Island-0.72% Saskatchewan -0.73% Nova Scotia-0.74%
-1.00% -0.50% 0.00% 0.50% 1.00%
Total Return
1 2.12
2.68 2.80
2.92 2.95
3.25 3.29
.50
.52
Quebec Saskatchewan Manitoba Alberta Provincials Overall New Brunswick British Columbia Prince Edward Island Nova Scotia Ontario Newfoundland
5.00 4.00 3.00 2.00 1.00 -
Spread (bps)
3 3.88 3.94
Source: PCBond, a business unit of TMX Group Inc., BMO Capital Markets
Provies Don’t Rebound After Ides of March
Despite encompassing a bevy of school-related holidays, March proved to be quite a busy month in the Provincial space, with budgets, new issuance and even an election call all affect- ing spreads to varying degrees. Without question, however, the biggest impact in the month was the election call in Quebec. Spreads for all provinces traded a little heavier in the wake of the announcement as investors naturally eschew any kind of uncertainty associated with an election, regardless of the province. Most provinces failed to rebound after the ides from this early month weakness and as a result the spread for Broad Provinces widened by 3 basis points during March.
More generally, there were movements in and out of bonds in March as geopolitical risk ebbed and flowed and the U.S. Fed waxed and waned about its intentions for monetary policy accommodation over the next couple of years. By month’s end,
Source: PCBond, a business unit of TMX Group Inc., BMO Capital Markets
GoC yields backed up a touch and Broad Provincials lost their pre-eminent position in the FTSE TMX Canada Universe Bond Index to Broad Corporates as a consequence. In fact, Broad Provincials was the worst-performing segment of the index at a loss of -0.48%. One of the biggest influences in this regards was the poor performance of underlying long Canadas and the longer duration of Broad Provincials.
However, the weakness in March was not sufficient to displace the lead of Broad Provincials on a year-to-date basis, with a total return of 3.42% after the strong rally in long Canadas during February. At the same time, it should be noted inves- tor predilection toward corporates in the current environment propelled Broad Corporate BBB ahead of Broad Provincials during March, with a year-to-date return of 3.80%, while Broad Corporate A followed closely at 3.35%. We still prefer corporates over provincials, as we believe yields will remain range-bound and investors will gravitate toward greater spread as a result.