-- Canadian long provincial returns were positive over the past month, as Government of Canada (GoC) yields were mostly steady, while spreads tightened, said Bank of Montreal (BMO).
Long provincial spreads tightened by roughly 8bps through April as the budget season wound down, writes the bank in its "Provincial Credit Watch" note for May.
The Bank of Canada remained on hold in April, and the market continues to price in rate hikes later in the year on
concern that high oil prices will lift and broaden core inflation in Canada.
From a year ago, long provincials continue to outperform GoCs, although with a "modest" 1.5% total return, stated BMO.
All provinces saw spreads tighten through April, with no major standout performers, pointed out the bank. With the budget season now complete, British Columbia continues to trade behind Ontario as its credit rating has deteriorated.
Alberta and Saskatchewan tabled budgets just before the Iran conflict lifted oil prices, but the market has tightened those spreads back in line with Ontario, added BMO. Quebec, ahead of an uncertain political cycle this fall, continues to trade behind Ontario.