After its meeting this past Wednesday, the Fed’s Open Market Committee announced that it would keep its fed funds rate unchanged as Fed Chairwoman Janet
Yellen noted that growth had picked up in the most recent quarter while inflation remains below the Fed’s 2% annual target. In its accompanying statement,
the Fed’s rate-setting committee said, “The case for an increase in the federal funds rate has strengthened but [the committee] decided, for the time
being, to wait for further evidence of continued progress toward its objectives. The stance of monetary policy remains accommodative, thereby supporting
further improvement in labor market conditions and a return to 2 percent inflation.” The timing of the next rate hike was not telegraphed either in the
statement or in comments Ms. Yellen made after the announcement. Those who purport to read the Fed’s tea leaves take this to mean that a there won’t be a
rate hike until December at the earliest.
In the meantime, the Bank of Japan invented a new tool that it calls “yield curve control,” which it says it will use to keep yields on 10-year government
bonds at zero while keeping short-term rates negative, in effect steepening the yield curve. Some observers believe this new policy of yield curve
targeting suggest the BoJ thinks that the more conventional monetary targeting policy has proven to be inadequate in boosting economic growth and reversing
Japan’s perennial deflation.
Bank of Canada Governor Stephen Poloz joined the stand-pat chorus of central bankers last week with a speech entitled “Living Lower for Longer,” in which
he reiterated that low growth and low interest rates have persisted for longer than the great economic minds of the age have anticipated, and are likely to
continue to remain low for some time yet, unless output growth can be increased through structural reforms that remove impediments to business growth.
Bond yields fell again as sentiment soured after the Fed’s rate decision, while traders also mulled over the outlook for crude oil, as the prospect for a
production pact by Opec members at next week’s meeting faded on continuing friction between Saudi Arabia and Iran. With energy prices a key component of
inflation, the prospect of an increasing U.S. inflation rate was also dampened, and with it, the yield on the 10-year U.S. Treasury note, which fell to
1.615% on Friday, its lowest level in two weeks.
* 3 new Forstrong Global funds from iA Clarington.
iA Clarington Investments
launched three new global funds sub-advised by Forstrong Global Asset Management Inc., led by Forstrong’s
President & CIO, Tyler Mordy. The actively-managed funds include Forstrong Global Strategist Income Fund, Forstrong Global Strategist Growth Fund, and Forstrong Global Strategist Balanced Fund. The funds aim
to invest globally, including in developed markets. “Our approach seeks to add diversity and differentiation to the typical core holdings of Canadian
investors, primarily through exposure to non-traditional sources of alpha identified through our macro asset allocation strategy,” said Mordy.
* RBC adds 4 income ETFs.
RBC Global Asset Management Inc.
launched four new exchange-traded funds that it says are designed to offer income opportunities in today’s low-yield environment.
RBC Canadian Preferred Share ETF (TSX: RPF)
invests in rate-reset preferreds of Canadian companies.
RBC Quant Global Infrastructure Leaders ETF (TSX: RIG)
invests in a global portfolio of infrastructure companies such as utilities, transportation, energy, and communications using a rules-based, multi-factor
RBC Target 2022 Corporate Bond Index ETF (TSX: RQJ)
and RBC Target 2023 Corporate Bond Index ETF (TSX: RQK) offer a specific
maturity structure to facilitate laddering strategies and are designed as a replacement for holding individual corporate bonds
* Horizons debuts 2 currency-hedged ETFs.
Horizons ETF Management (Canada)
debuted its Horizons S&P 500 CAD Hedged Index ETF (TSX: HSH) and the Horizons US 7-10 Year Treasury Bond CAD Hedged ETF (TSX: HTH), offering
currency hedged exposure to U.S. equity and government bond asset classes.
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