Canada's fixed income landscape – Sri Tella & Lee Ormiston

Today, we’re joined by Fidelity Portfolio Managers Sri Tella and Lee Ormiston to discuss the latest economic developments, and what the results mean for investors. Our focus today is on the Bank of Canada’s recent interest rate cut, inflation, and evolving fixed income strategies. Lee shares his thoughts on the higher-than-expected CPI, highlighting that Canadian inflation has a momentum that is rising faster than global trends. Meanwhile, Sri talks about the timing and pace of these cuts, advocating for a gradual approach to these rate reductions. Both then discuss the yield curve, and how they anticipate it to steepen in the short-term. Lee mentions that long term rates are currently fair, and he sees opportunities in the front end of the yield curve. Sri then addresses the current economic outlook, and future investment implications. He suggests that regardless of the current recession risk, there is a low probability for recession given the strong labour market and population growth. Lastly, the two discuss their fixed income positioning, emphasizing a focus on ten-year notes, and a cautious approach due to long-end yield curve inversion. They close off by stressing the importance of earning yield with controlled risk, while simultaneously adapting to economic and market changes.

 

Recorded on June 27^th, 2024.

 

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