Update on the Real Return Bond Market
Following the Government of Canada’s decision last week to cease issuance of real return bonds (RRBs), we’ve spoken to a number of dealers to understand the impact of this move. More broadly, we’ve heard that the overall tone is less liquidity, and dealers anticipate less trading. In a few cases, we’ve heard of index fund managers rebalancing their portfolios (primarily trading 50s and 54s). Some dealers’ clients commented that if there were distressed sellers, they would be better buyers. However, there have been no distressed sellers. Overall, recent weeks have been very quiet for RRBs.