The yield-to-worst of the S&P Canada Aggregate Bond Index touched a low of 1.53% on February 2, 2015 after 10 years of history in which the index’s yield had been as high as 4.96% back in June 2007. After a solid total return of 4.35% in January, the index gave up a little ground and returned -0.11% for February. March has come in like a lion, as it has wiped out 2% of returns as of March 6, 2015. As of the same date, the index is returning 2.15% YTD.
The components of the S&P Canada Aggregate Bond Index are all wider by an average of 29 bps as of March 6, 2015; S&P Canada Sovereign Bond Index (28 bps), S&P Canada Provincial & Municipal Bond Index (32bps), S&P Canada Investment Grade Corporate Bond Index
(26 bps), and S&P Canada Collateralized Bond Index (32 bps).
Last week, Canadian bonds sold off for the entire week. The Bank of Canada held its policy interest rate unchanged at 0.75%, and backed up the no action with statements that the level is the appropriate rate. This is in contrast to the Jan. 21, 2015 cut of 25 bps from the 1% level in response to lower oil prices. The rate cut was a complete reversal of policy and tone for the BOC.
After a stellar 2014 in which the S&P Canada Provincial & Municipal Bond Index returned 10.48%, this index is still out in front as of March 6, 2015, returning 2.76% YTD. Provincials & Municipals Index had a strong January (+5.58%), although they are getting hit the hardest in March, at -2.57% as of March 6, 2015.
The best performer in the recent downtrend has been the S&P Canada Collateralized Bond Index losing only -0.39% of return MTD.
Source: S&P Dow Jones Indices LLC. Data as of March 6, 2015. Past performance is no guarantee of future results. Charts and graphs are provided for illustrative purposes.