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Post-election focus turns to Bank of Canada

Canada's provincial bonds appear more attractive than sovereign debt as focus shifts from Canada's election to tightening monetary policy, with a Bank of Canada rate hike expected as early as 2022, two senior investment strategists said.

Provincial bonds, which earn higher yields than sovereign debt, provide good diversification options for international investors, SLC Management managing director Dec Mullarkey told the Reuters Global Markets Forum on Tuesday.

Kevin Headland, senior investment strategist at Manulife Investment Management, echoed that view, saying the Bank of Canada's continued tapering of asset purchases amid ongoing fiscal support should result in a steeper yield curve.

“In Canada, you are likely best off in provincials that offer a better yield,” Headland said.

The appeal of sovereign bonds has been driven down by Canada's burgeoning national debt, which Prime Minister Justin Trudeau's Liberals have pushed to over $1 trillion, with budget deficits around their widest level since the Second World War.

During the election campaign, the Liberals said they would hike the net tax rate on the most profitable banks and insurers.

BUSINESS

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2021-09-23T07:00:00.0000000Z

2021-09-23T07:00:00.0000000Z

https://saltwire.pressreader.com/article/281921661190497

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