Bond market selloff: What to know for your portfolio, rate hikes, recession odds

The Baun and Pate Investment Group at Wellington-Altus Private Wealth joins Global News Morning Calgary to offer insight into the day’s biggest market stories.A selloff in global bond markets could have major implications for Canadian households and investors as experts say financial markets are readjusting their long-term expectations for

Stocks have generally struggled since the summer under the weight of soaring Treasury yields in the bond market. High yields undercut stock prices by pulling investment dollars away from stocks and into bonds. They also crimp corporate profits by making borrowing more expensive.Bond yields help to inform borrowing rates on a number of key lending products in Canada such as mortgages and car loans.

While he expects the Bank of Canada will watch for signs of easing in inflation and the labour market before making its next rate decision on Oct. 25, he says policymakers will likely be “mindful” of the bond market if it’s providing further tightening without the central bank needing to move again.A technical recession is often defined as two straight quarters of negative GDP growth.— the point at which short-term bond yields outperform longer-term yields.

Expectations for companies’ capitalizations and growth rates will have to be revised for a market that sees consumers’ spending power restrained and corporate spending power limited amid tighter borrowing conditions than they enjoyed in the past decade, he argues.“Valuations, in a normal environment, are going to have to reset lower to account for that.”

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