Energy Shock, Sticky Inflation & Record Bond Issuance

Hinzugefügt: 2026-05-12

[00:00:03]Hello everyone. It's En Bulu here, fixed income portfolio manager with 9inpoint partners. This is our uh little monthly update on what's going on in fixed income. Well, first of all, the war first of all, the war in Iran keeps going. Uh so that's pushing energy prices. We have CPI this morning in the US for April. It's elevated 3.8% yearonear. Uh we're probably going to hit the four handle at some point if this continues. The details are a little better than expected, but nonetheless, our view is the Fed doesn't do anything for the foreseeable future. If anything, if this continues, if the war on in Iran drags on, they might have to start thinking about raising rates at some point uh late this year. It's probably not something anybody wants to talk about right now, but that's something to keep on our radar. In Canada, we had the Bank of Canada meeting. Uh they they keep talking aishly about uh energy prices. uh they they want to make sure they don't spill into the rest of the uh economy. Inflation has been well contained around 2% for a year and a half now in Canada. Uh the labor market remains weak. Last week we had unemployment uh coming in at 6.9%. We're losing jobs in in many sectors. There's still the overhang of the trade war. Uh USMC renegotiation. So the Bank of Canada is in a good spot considering this energy shock. They don't have to hike. I think they're going to keep talking about it to make sure that people are aware and and that inflation expectations remain anchored, but uh they don't probably don't want to hike too much. The economy is fairly weak and and they don't probably don't need to hike. Um in credit, one thing that's been on everybody's radar this year has been the massive supply from AI hyperscalers. So in the US, supply is up 30% yearonear uh versus where we were last year. In Canada, supply is up 2x versus where we were last year. That's a massive increase in in supply. We had Google uh make history last week printing 8.5 billion in Canadian dollars. That's the biggest ever deal in Canada. The deal was really well subscribed. There was 19 billion in orders in the book. We expect more to come probably Amazon next. Um what that does this massive amount of supply is it it just it pressures generally spreads wider because there's just so much paper to be absorbed and at current pace at the current pace of issuance uh we're going to break like all-time higher records in both Canada and the US in terms of uh IG issuance. So keep an eye on that. We're we've been avoiding investing in sectors where we think issuance is going to be very large for those reasons. Uh so we're participating in those new issues. They're doing they're going well. Um people want exposure to hyperscalers. They've been making space in their portfolios. So uh and index participants are going to need to buy them and and uh and so we're we're active in this space uh and we're participating but we're also mindful of uh of the risks if uh more comes to market. How does that impact other parts uh particularly in in uh 30-year 20-year bonds? So so these are all things we're talking about in the note. Um, it should be published probably later this week.

[00:03:12]Thank you very much for your time. Have a great day.