http://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/http://www.fxstreet.com/fundamental/http://mediaserver.fxstreet.com/images/fxstreet-provider-logo1-en.gif7http://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2012-01-30.htmlHighlights Between now and late 2014, the FOMC will have many occasions to revise its assessment of when a first rate hike will be appropriate. Still, for the time being, not only has the Fed anchored short term rates for longer but it appears that the lifespan of the range in which 10-year Treasuries have traded since August has also just been extended. With the BoC disinclined to raise rates anytime soon and Canada a member of the select group of countries rated AAA by Standard and Poor’s,Mon, 30 Jan 2012 09:14:07 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2012-01-30.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2011-12-22.htmlHighlights Volatility in the slope of the curve will be driven by swings in the long portion of the curve. Although news from Europe is likely to support bull flattening at times, our economic scenario suggests that 10-year Treasuries will close 2012 trading around 2.6%. Since we expect Canadian GDP to grow only marginally more than 2% in 2012 and given the Bank of Canada’s concern about Europe, the BoC is most likely to keep its monetary stance unchanged in 2012. We now expect the BoC’s firstThu, 22 Dec 2011 22:37:21 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2011-12-22.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2011-11-29.htmlHighlights In the current environment, the action or inaction of politicians is a major factor in the outlook for the bond market. If they succeed in containing the European threat, 10-year Treasuries are likely to be trading around 2.65%latter next summer. If they don’t, we would expect a sustained move below 2%, to 1.4% or lower. In an environment where international considerations will dominate domestic ones, Canadian bond yields are likely to trade in sympathy with the senior market southTue, 29 Nov 2011 15:39:39 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2011-11-29.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2011-10-30.htmlHighlights Fears of a second dip into recession are now nowhere near the level of late September. In the U.S., we see growth of 2.2% from fourth quarter 2011 to fourth quarter 2012 and headline inflation averaging 1.7%. The Fed will keep its policy rate near zero but will not have to fight a deflation threat. Accordingly, the Fed will complete Operation Twist but will not initiate a new round of quantitative easing. In our view, the 12-month outlook for long-term interest rates has shiftedSun, 30 Oct 2011 22:52:04 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2011-10-30.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2011-09-23.htmlHighlights With U.S. economic growth stubbornly slow and the political process giving no support to household and business confidence, we would expect the yields of long Treasuries, supported by a new version of Operation Twist, to remain in a trading range for some time despite their current low levels. The risks to the Canadian economy, largely external, are skewed to the downside. Although our base case scenario is that the Bank of Canada will stay on the sidelines through the first half ofFri, 23 Sep 2011 19:41:12 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2011-09-23.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2011-08-26.htmlHighlights We expect that by year end, despite weak Q4/Q4 growth of 1.2%, the U.S. economy will be expanding quarter-toquarter at an annual rate close to 2.5%. We see it continuing at that pace for most of 2012 before slowing somewhat going into 2013. That scenario, in our view, will be enough to take the 10-year yield higher but not materially above 3% in 2012. In light of the deterioration in the economic outlook, coupled with the Fed’s conditional commitment to stay put on rates until 2013,Fri, 26 Aug 2011 20:24:45 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2011-08-26.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2011-06-30.htmlHighlights At its June rate-setting meeting the FOMC updated its economic projections. With the unemployment rate expected to decline more gradually in 2011 and growth expected to be somewhat weaker, the period of low interest rates is likely to be more extended than we had previously envisioned. Given the Fed’s adjustments to its outlook, we are moving our expectation for the Fed’s first rate hike to Q1 2012 from Q4 2011. The underlying inflation trend has deteriorated both internationallyThu, 30 Jun 2011 16:05:36 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2011-06-30.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2011-05-30.htmlHighlights In our view, U.S. GDP growth will return to an annual rate of about 3% in the coming months and core inflation will end the year above 1.5%. Current yields will be not sustainable later this summer when indicators confirm that the economy has emerged from its soft patch. The underlying trend of rates will be upward. We continue to expect the 10-year yield to be trading above 4% at year end. At this writing, the OIS market is not fully discounting a Canadian rate hike beforeMon, 30 May 2011 22:11:38 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2011-05-30.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2011-04-21.htmlHighlights At this point only a few FOMC members believe economic conditions might warrant a move to a less accommodative stance this year. In our view, the improving trend of both the job market and bank lending could move many doves around the FOMC table to a more hawkish position before year end. The current mix of low interest rates and rising U.S. core inflation leaves us somewhat apprehensive about the behaviour of the 10-year rate once the Fed’s large-asset purchase program comes to anThu, 21 Apr 2011 20:57:23 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2011-04-21.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2011-03-25.htmlHighlights The yield of 10-year Treasuries has traded as high as 3.76% (overnight in early February) and as low as 3.15% so far in March. Our expectation is that U.S. economic data will be robust in coming months. If the international news is also more comforting, the retracement toward recent high yields could be abrupt. We continue to expect 10-year Treasuries to  be trading around 4.17% by year end. Given the recent trend of core inflation and an unusually uncertain internationalFri, 25 Mar 2011 20:46:34 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2011-03-25.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2011-02-01.htmlHighlights With economic recovery proceeding largely in line with our December projection, we see no reason to materially change our forecast of 10-year interest rates this month. The tone of the Bank of Canada’s January Monetary Policy Report leaves us with the impression that the Bank’s withdrawal of monetary stimulus will be gradual and is unlikely to resume before May. By then the Fed will be almost done with QE2 and the Bank will be in an easier position to move off the sidelines.Tue, 01 Feb 2011 10:03:36 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2011-02-01.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2010-12-20.htmlHighlights We expect that the combination of a second round of quantitative easing and fiscal policy stimulus will lead to a considerable improvement in the U.S. economy and labour market. In that context, our fair-value model suggests that 10-year Treasuries will be trading around 3.48% in Q1 2011 and heading to 4.17% by the end of 2011. We think the Bank will use its April Monetary Policy Report to set the stage for a resumption of rate hikes in May rather than in July as we previouslyMon, 20 Dec 2010 18:13:32 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2010-12-20.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2010-11-29.htmlHighlights With QE2, the Fed has announced not that it is pegging the 10-year rate, but that it is introducing a dirty float. It could always decide to lean more or less forcefully against the wind if it deems necessary. That said, our base case scenario is for an acceleration of U.S. GDP growth in 2011, with the 10-year rate drifting higher even in a dirty-float  environment. A risk to our interest-rate forecast is that renewed worries over European sovereign-debt contagion couldMon, 29 Nov 2010 13:02:01 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2010-11-29.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2010-10-29.htmlHighlights In our opinion, an open-ended second round of quantitative easing combined with a conditional commitment and more inflation guidance is probably the best chance the FOMC has – absent the involvement of fiscal authorities – to achieve better outcomes for both employment and inflation over the medium term. How long the Bank of Canada will remain on the sidelines is an open question. The right course is likely to depend heavily on fiscal and monetary policy south of the border. InFri, 29 Oct 2010 19:23:04 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2010-10-29.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2010-09-24.htmlHighlights U.S. economic data and anecdotal evidence from the Beige Book have remained consistent with a picture of modest growth with low but positive inflation. However, if economic conditions were to soften much further, the risk of inflation edging down from its current low would leave the Fed little choice but to deploy its policy tools more aggressively. We are not there but QE II cannot be ruled out. With emerging markets being the main drivers of commodity prices while downside riskFri, 24 Sep 2010 18:53:06 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2010-09-24.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2010-08-31.htmlHighlights In recent weeks, economic data have continued to be disappointing. U.S July durable goods orders were much weaker than projected suggesting business investments which have been an important source of growth so far might be running out of steam. It appears evident the U.S. economy will continue to need additional stimulus in order to close the current output gap and reduce the unemployment rate. Therefore, monetary policy can be expected to remain extremely accommodative well intoTue, 31 Aug 2010 21:08:37 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2010-08-31.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2010-06-28.htmlHighlights In the current circumstances – heightened economic uncertainty abroad, substantial U.S. unemployment, falling unit labour costs, a prospect of persistently subdued inflation – the Fed is likely to remain on hold longer than we thought. We have tentatively pushed the first rate hike into Q1 2011. The Bank of Canada decided it was time for a first rate hike at its June rate-setting date. The Bank was keen to point out that monetary policy remains quite accommodative and that the paceMon, 28 Jun 2010 19:38:38 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2010-06-28.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2010-05-28.htmlHighlights With 12-month core CPI inflation falling below 1% in April for the first time since the 1960s and unit labour costs continuing to fall, the Fed has the luxury of waiting to see how the European situation unfolds before it must normalize its policy stance. Assuming that the political response to the European crisis will succeed in calming markets over time, we now anticipate the Fed to start hiking rate in the fourth quarter of this year. The overall environment for Canada remainsFri, 28 May 2010 19:20:23 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2010-05-28.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2010-04-23.htmlHighlights Although our version of the Taylor rule suggests that U.S. monetary policy will need to remain accommodative, a zero policy rate combined with the excess liquidity in the system will be too much. In a post-quantitative-easing world, raising the target rate 2 points between now and mid-2011 would be one way to bring the overall monetary policy stance into line with our projected economic fundamentals. We have modestly revised our forecast for the long end of the yield curve in lightFri, 23 Apr 2010 19:18:38 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2010-04-23.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2010-03-26.htmlHighlights So far we see no reason to alter our base case scenario for the unfolding of the Fed’s exit from its stance of maximum accommodation. We still see the Fed starting to normalize its policy rate in August. The Bank of Canada should seize the occasion and use the April Monetary Policy Report to prepare market participants for a scenario where a rate hike could occur before the month of July. Although, U.S. and Canadian short term yields are expected to converge over time, we think theFri, 26 Mar 2010 19:02:12 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2010-03-26.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2010-02-26.htmlHighlights The February blizzard depressed U.S. economic activity during the month. This will weaken the economic data to be published in March and make them harder to analyse. In these circumstances, the 10-year yield is unlikely in the short run to break out on the upside from its recent trading range. However, we remain confident that the economic underlying trend is positive and the Fed will be in a position to start normalizing its policy rate in August. The rate increases will beFri, 26 Feb 2010 19:24:07 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2010-02-26.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2010-01-21.htmlHighlights The outlook for U.S. monetary policy will depend as much on bank behaviour as on the labour market. Since incoming data have yet to show a change in bank lending or significant growth in employment, we are pushing back our forecast for the first Fed rate hike to August 10 from April 28. Although we think a gradual but early exit strategy would be well advised, Mr Carney will have the last word. Still it is only a question of time before short term rates will be driven up by theThu, 21 Jan 2010 20:53:02 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2010-01-21.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2009-12-24.htmlHighlights With the economy gaining momentum into 2010 and the labour market showing signs of stabilization, we think the Fed will have to take advantage of its first window to raise its policy rate – the rate setting meeting of April 27-28, 2010 Considering the wealth effect of improved terms of trade and rising home prices, together with our outlook on the strength of the recovery, we continue to think the Bank of Canada will exit from its zero-interest-rate policy before mid- 2010. In thisThu, 24 Dec 2009 11:23:28 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2009-12-24.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2009-12-07.htmlHighlights With the fed funds rate near zero and with the prospects of significant near-term improvement in the labour market regarded with widespread skepticism, it seems to us that the U.S. bond market is likely to react strongly if job creation exceeds expectations in the near term. Even given our more optimistic outlook for job creation, current central banks mind-set suggests that a first rate hike will have to wait until April 2010. We see both the fed funds target rate and the Bank ofMon, 07 Dec 2009 13:13:41 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2009-12-07.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2009-10-27.htmlHighlights We believe conditions are in place for the U.S. economy to improve faster than expected. Stabilization of the labour market south of the border will bring a reassessment of the Fed’s current zero-rate policy stance. This will go far to relieve pressure on the Canadian dollar. In that environment, the loonie will not be the drag the BoC is currently expecting. Our scenario suggests that the front end of the yield curve will normalize faster than is generally expected. In this lightTue, 27 Oct 2009 14:05:53 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2009-10-27.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2009-10-01.htmlHighlights Since we see financial market stress as having declined substantially and expect employment growth to resume before year end, we expect the move toward a 2% fed fund rate in 2010 to be front-loaded, starting as early as the first quarter. As the economy continues to pick up, the debate over the pace at which monetary accommodation will be removed can only become more heated. Although there is disagreement on the matter, nevertheless a flattening of the Canadian yield curve is on theThu, 01 Oct 2009 08:36:06 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2009-10-01.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2009-08-31.htmlGiven our forecast that U.S. GDP will grow in Q3 and later, we expect the 10-year Treasury yield to drift higher over time. Yet with core inflation remaining sticky around the current rate in coming months, the upward drift is likely to be limited. We continue to see 10-year Treasuries trading around 4.03% by year end. With incoming Canadian economic data remaining supportive of our projections, we are keeping our interest rate forecast unchanged. We continue to expect the BoC to raise ratesMon, 31 Aug 2009 10:11:28 GMThttp://www.fxstreet.com/fundamental/analysis-reports/info@nbc.ca (National Bank of Canada)http://www.fxstreet.com/fundamental/analysis-reports/monthly-fixed-income-monitor/2009-08-31.html