Canadian Fixed Income Conference
September 28-29, 2021
By Bloomberg Live
The 9th annual Bloomberg Canadian Fixed Income Conference convened the biggest names in Canadian bonds, credit, commodities, and more, in a two-day virtual event on September 28-29, 2021.
As world economies seek to rebuild after the Covid-19 pandemic, these conversations have seldom been more relevant and timely. We gathered top investors, analysts, CEOs, CFOs, government officials, and bankers to discuss everything from insurance to real estate to mining to ESG to economics and more.
The afternoon session of Day One featured panel discussions on the Economy and Provincial Borrowing and keynote interviews with representatives from the World Bank, European Investment Bank and CDPQ.
Click here to view video of today’s event.
- Rodney Balkwill, Executive Director, Treasury Management Branch, Ministry of Finance, Saskatchewan
- Beata Caranci, Chief Economist and Senior Vice President, TD Bank
- Don Delisle, Assistant Deputy Minister, Treasury Division, Manitoba
- Vincent Delisle, Executive Vice President and Head of Liquid Markets, CDPQ
- Lowell Epp, Assistant Deputy Minister, Treasury and Risk Management, Alberta
- Mike Manning, Executive Director and Chief Investment Officer, Capital Markets, Ontario Financing Authority
- Stéfane Marion, Chief Economist and Strategist, National Bank of Canada
- Millan Mulraine, Chief Economist, Ontario Teachers Pension Plan
- Heike Reichelt, Head of Investor Relations and Sustainable Finance, World Bank Treasury
- Aldo Romani, Head of Sustainability Funding, European Investment Bank (EIB)
- Kait Bolongaro, Canadian Government Reporter
- Derek DeCloet, Managing Director, Canada
- Shelly Hagan, Reporter
The Economic Landscape
Stéfane Marion, Chief Economist and Strategist, National Bank of Canada, Beata Caranci, Chief Economist and Senior Vice President, TD Bank, and Millan Mulraine, Chief Economist, Ontario Teachers Pension Plan, discussed the economic landscape with Bloomberg’s Shelly Hagan. The first part of the discussion focused around inflation. After reflecting on Quarter 2 earnings, Millan Mulraine stated that his “key concern” in a growth outlook for this year is inflation. “While Canada will regain the output lost during the downturn over the next quarter or two, it will take some time for us to recoup and get back to the slack that would have been generated, so we wouldn’t close the output gap for some time. Even so, there is still likely to be an upwards pickup in inflation over the next few years, and we do think that the inflation is likely to be a bit more persistent. In terms of economic policy, Mulraine expected that inflation will be the “central theme around which policy response will be calibrated by central banks.”
One industry that showed high inflation in the last CPI reading was Canada’s housing market. TD Bank’s Beata Caranci offered insight on this issue: “Canada continues to suffer from a supply shortage, so we continue to see the demand for house purchases being quite high. Now, we did see out of the platforms from the election under the liberals and the NDP as well as the conservatives, that there was a push towards adding more supply in the market. However, this is not instantaneous, It takes several years and it requires coordination as well with either provincial or municipal level governments. If the demand side is reacting ahead of the supply side, it gives you one direction on where prices are gonna go. You actually could run the risk of eroding affordability.”
Next, our panelists discussed the impact of the Delta variant. Stefane Marion showed optimism for Canada, despite seeing “slight” damage in the third and fourth quarter due to supply chain issues. “We saw big declines in the production of autos, for example, in our country. So under these circumstances, I don’t expect widespread economic shutdowns like the ones we suffered in the two previous waves. So I think we’re relatively well positioned, and hence our view that we’re looking for a five cent appreciation in the Canadian dollar in the coming quarters, to reflect that relative out-performance of the Canadian economy, if we’re right with our forecast.”
All three guests agreed unanimously that they are expecting the Bank of Canada to taper to one billion in October at the next meeting.
Provincial Bond Opportunities Part I
Don Delisle, Assistant Deputy Minister, Treasury Division, Manitoba and Rodney Balkwill, Executive Director, Treasury Management Branch, Ministry of Finance, Saskatchewan, discussed provincial borrowing with Bloomberg’s Shelly Hagan. Our guests shared their borrowing needs for the rest of the fiscal year. Don Desisle outlined Manitoba’s plan: “We are attempting to stay very liquid these days because of the uncertainty with respect to the COVID-19 pandemic and whether that’s going to have any effect on markets. We’re not quite sure what’s going to happen potentially with expenditure. We’re going to continue to stay conservative and very liquid in both domestic and international markets.”
Rodney Balkwill talked about the benefits of looking beyond the domestic: “Being in the international markets opens up a whole new level of investor base to purchase the province’s debt. So in Canada, it’s a very deep market. It’s been very good for funding but from a risk perspective, it’s a great idea to broaden out into the broader world markets that buy-in. It really elevates the game in terms of the sophistication of the investor base that we can bring to bear.”
Provincial Bond Opportunities Part II
Mike Manning, Executive Director and Chief Investment Officer, Capital Markets, Ontario Financing Authority and Lowell Epp, Assistant Deputy Minister, Treasury and Risk Management, Alberta discussed economic activities in their provinces. Mike Manning discussed green bonds in Ontario, a province that has been a regular issuer of the bond program since 2014. “We benefit from having an infrastructure spending program that supports our green bond program–transportation, for instance.” Lowell Epp of Alberta shared how the energy market and oil prices have affected the province. “It’s certainly had a positive impact on revenues. Revenues will be six point nine billion higher from net non-renewable natural resources. It also obviously impacts employment markets and therefore income markets, and our income taxes are up a couple of billion. The reduction in the deficit of about 10 billion is due to the higher oil prices.”
Sustainable Finance at the World Bank
Heike Reichelt, Head of Investor Relations and Sustainable Finance, World Bank Treasury talked with Bloomberg’s Kait Bolongaro about investor demand for sustainable investments. She stated that since the World Bank issued its first labeled green bond, there has been a “shift in capital markets.” Whereas discussions once solely revolved around the financials, interest rate credit, for instance, the approach is now far more “holistic”. One specific aspect of this shift is that “investors are asking more questions about the issuer.” For this reason, labels are just the starting point for ESG investments. Investors are looking towards “different sources of information, including ESG scores, including impact reports, and platforms that provide data like Bloomberg will play an important role in helping investors compare different products.”
Creating a Framework for Sustainable Finance
Aldo Romani, Head of Sustainability Funding, European Investment Bank (EIB) spoke with Bloomberg’s Derek DeCloet about what is needed to ensure sustainable investing remains meaningful: “It is important to establish a kind of a common language that permits the various market stakeholders to all clarify where their priorities lie, to make them accountable, and to compare them. In order to have comparability, of course, you must simplify. Because what we’re looking for is not just the best possible, and probably unachievable set of definitions of technical nature of the sustainability of economic activities, but rather a set of rules that permit markets to work better. What is important is to clarify and identify a standard, neutral classification system that permits people to clarify the specific features of their standards with regard to those core features, to those characteristics and core aspects of sustainability, and using those indicators that people in the markets can compare.”
The Investment Approach of the CDPQ
Vincent Delisle, Executive Vice President and Head of Liquid Markets, CDPQ discussed with Bloomberg’s Derek DeCloet the CDPQ’s approach to investing: “ Absolutely, one of the main advantages for pension funds and one that we feel very strongly about is the advantage, the opportunity to be there for the long-term. So as long-term investors, you’re less sensitive to short-term moves in the market, short-term volatilities. And what we find is sticking to fundamental processes, looking at quality companies that are there for the long term, has some great benefits for our performance, reduces volatility as well, so our clients are happy with that and that’s one of the pillars of our strategy at Caisse de dépôt.”
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