The FTSE Canada Universe Bond Index, which tracks the Canada investable bond market and is widely followed by Canadian fixed income investors, experienced a shift of 0.196 years in its modified duration on June 3, 2019 as investors received payment of approximately $9.9B in June 1-3 coupons, $9.5M in June 1-3 principals and $30.6B rollout of June 1-3, 2020 bonds. This shift is outlined in a recent FTSE Canada Index Extension Report.
And based on simulations conducted by FTSE Russell Canada as of June 3 as part of its most recent Index Extension Report, we expect to see another increase of approximately 0.049 years in the modified duration of the FTSE Canada Universe Bond Index on June 17. There will also be a shift in the Short, Mid and Long weights of the Index due to the rollouts and the rollovers of the June 15-17 bonds.
Alec Young, managing director, Global Markets Research, FTSE Russell:
“The long-term increase in the modified duration of FTSE Canada Universe Bond Index to a recent 7.9 years from 6.2 years in 2005 has been additive to its investors’ total returns as Canadian government bond yields have declined steadily since 2005—down to 1.6% from 2.5% last fall and 4.5% in 2005. Global macroeconomic forces recently depressing bond yields include the slowing global growth led by Europe, Japan and China and exacerbated by seemingly endless US-China trade uncertainty.”
Marina Mets, managing director, research, FTSE Russell Canada:
“With ongoing global market volatility and the inversion of the Canadian yield curve, investors seek tangible analysis and insights to the expected shifts in Canada bond market duration. Our Index Extension reports, as reflected by the FTSE Canada Universe Bond Index, are widely used by investors as a tool to better understand potential impact to portfolios and positions during current market headwinds.”
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