Bond investors face headwinds from central banks

Canadian market could outperform U.S., Dynamic managers say.

Sonita Horvitch 28 March, 2018 | 5:00PM
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Michael McHugh, vice-president and head of fixed income at 1832 Asset Management L.P., says that the team's analysis points to low returns from the bond market this year. "This reflects the headwind of rising bond yields, as central banks continue to reverse their ultra-easy monetary policy measures in the face of stronger global economic growth."

In this changed interest-rate environment, there is the potential, McHugh cautions, for lower returns from corporate bonds. These bonds have for some time been favoured by investors seeking income, he says. "In all, this makes a strong case for active management to mitigate losses and improve returns from fixed-income securities."

While the outlook for returns from the bond market on both sides of the border is modest, he says, it's possible that the Canadian bond market could outperform its U.S. counterpart over the course of this year.

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Sonita Horvitch

Sonita Horvitch  

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