Natixis Canada Blog

Jeff Herold:

Jeff Herold Commentaries


Preferred Shares Rally into Early April, But Finish the Month Slightly Lower

Jeff Herold
Jeff Herold, Portfolio Manager, NexGen Canadian Preferred Share Fund

The Canadian preferred share market initially extended its rally into early April, but prices declined over the balance of the month to finish slightly lower than where they began. In part, the pullback later in the month could have been market fatigue as preferred share prices have risen almost continuously since mid-November. As well, some investors appeared to have been buying rate reset issues in anticipation that rising 5-year Canada bond yields would improve their dividend rates. However, when bond yields hit their lowest level of 2017 in April, that rationale lost support. The decline in bond yields reflected a risk-off shift in investor confidence which impacted preferred shares, as well as common equities. Also, index rebalancing later in the month saw more issues entering the index than being removed. In order to make room for the additions, indexed portfolio managers may have been forced to do more generalized selling of other issues, which led to further weakness in the market. In addition, the issuance of structured notes linked to preferred share ETFs declined, thereby reducing preferred share demand for hedging purposes. The S&P/TSX Preferred Share Total Return index had a flat return of 0% in the month.

Read More…

Bonds Break Out of Their Trading Range, With Prices Moving Higher and Yields Declining in April

 

Jeff Herold
Jeff Herold, Portfolio Manager, NexGen Canadian Bond Funds

Following four months of sideways movement, bonds broke out of their trading range in April, with prices moving higher and yields declining. In large part, the catalyst for lower yields was the flagging optimism about the U.S. economy. The combination of weaker than expected economic data, the chaotic performance of the new Trump administration, and the inability of the U.S. Republican Party to agree on major policies such as the repeal of Obamacare, caused investors to lose confidence in the anticipated economic acceleration from the implementation of Trump’s election promises. Canadian bond yields lowered, following U.S. bond yields. The FTSE TMX Canada Universe Bond index returned 1.43% in April.

Read More…

Canadian Preferred Shares Continue Their Upward Pattern in March

Jeff Herold
Jeff Herold, Portfolio Manager, NexGen Canadian Preferred Share Fund

Canadian preferred share prices continued to move upward in a seesaw pattern during March. An absence of new issues and occasional ETF flows were contributing factors behind the market strength. Interestingly, increased purchases of preferred share ETFs had a delayed reaction to underlying preferred share prices. As well, when ETF volumes declined, it led to preferred share prices retracing their gains. The S&P/TSX Preferred Share index returned 1.81% in the month. The Solactive Laddered Rate Reset index gained 2.13%, as rate reset issues outperformed other types of preferred shares.

Read More…

Canadian Bond Market Remarkably Stable in March

 

Jeff Herold
Jeff Herold, Portfolio Manager, NexGen Canadian Bond Funds

The Canadian bond market was remarkably stable in March, as a federal budget, a rate increase and legislative turmoil in the U.S. and the United Kingdom’s decision to exit the European Union were taken in stride by investors, with each event having minimal impact on the market. Bond yields in Canada and the United States remained within their respective trading ranges which began in early December. The FTSE TMX Canada Universe Bond index returned 0.41% in March.

Read More…

Canadian Bond Market Seesaws in February as Yields Rise Then Fall Twice in the Month

 

Jeff Herold
Jeff Herold, Portfolio Manager, NexGen Canadian Bond Funds

The Canadian bond market moved in a seesaw pattern in February, with yields rising and then falling twice in the month. The bond market remained in the trading range that began in December, once the market had initially reacted to the surprise U.S. presidential election result. The market’s focus remained on the new U.S. administration, as the correlation between Canadian and U.S. bond yields was very high. Investors were hoping for greater clarity on the new government’s fiscal, regulatory and trade policies. The economic consensus remained optimistic, with risk premia (yield spreads) for provincial and corporate bonds shrinking and the U.S. stock market continuing its post-election rally. The FTSE TMX Canada Universe Bond index returned 0.96% in February.

Read More…

Invest better: Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Mutual fund securities are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer.