Canada

Despite concerns about fiscal sustainability, a rise in term premia, and attacks on central bank independence, monetary policy remains the primary driver of bond markets. In our Q3 Review & Outlook, we update our views and identify opportunities in government bonds, short-term interest rate futures, global yield curves, inflation-linked bonds, and credit.

Monetary policy divergences are re-emerging. We rely on BCA’s Central Bank Monitor to assess the current policy stance of major central banks, and highlight the tactical opportunities across bond markets and currencies. 

This week our screeners explore offshore Chinese internet stocks, US Healthcare equities, and sectoral opportunities in the Canadian bourse.    

Political instability across Asia is colliding with the trade war fallout, forcing Southeast Asian economies to ease monetary and fiscal policy, while pushing the Bank of Japan in the opposite direction.

In the Alpha report, we maintain our bullishness on the equity market. We are optimistic that the cash-fueled cycle will evolve into a leverage-driven one, with the AI capex cycle acting as the "bridge" between the two. Our view is easily falsifiable. If the 10-year yield starts moving against us, we will pull the plug on the cycle. One reason to fret is that tariff revenue has now become critical to the equity bull market. Without it, bonds could riot. 

Monetary policy surprises shape curve trade returns. We show where steepeners and flatteners offer the best risk-reward in today’s market.