Moody’s raised its ratings for Canada’s largest banks in July, as it adjusted its methodology for the upcoming bail-in regime. With Moody’s changes, that meant that most of the rating agencies rated the deposit notes of the big five banks in the AA category, which led to some shifts in the breakdown of the bond indices. AAA & AA rated corporates increased to 7.83% of the Universe Bond index from 4.62% a month ago, while the A-rated corporate subsector dropped from 12.88% of the Universe index to 9.60%.

Since July 2017, when the Bank of Canada began its series of interest rate increases, the yields of shorter term bonds, such as those maturing in 2 or 5 years, has risen sharply. So far, the Bank has increased its overnight target by 100 basis points, while 2 and 5-year bond yields have risen approximately 95 and 80 basis points, respectively.

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