Note from the Credit Desk
The last few weeks have been nothing short of emotionally exhausting for many investors. The volatility in equity and fixed income remain at elevated levels. With this comes opportunity, and Amplus has the flexibility of using many tools at its disposal to produce positive returns for our investors in any market environment. As we continue to remain disciplined and nimble with our credit exposures, we continued to add interest rate risk to our portfolio. The market is already pricing in multiple central bank rate hikes over the next 12 months, and our in-house view is that the market may cool down much quicker than anticipated, allowing our positions to benefit from this view.
Two topical credit stories worth highlighting:
The Rogers / Shaw saga continues: weekend headlines mentioned the Canadian competition bureau’s plans to oppose the merger. With recent earnings out from both Rogers and Shaw expecting the deal to close by Q2, we actively put on a capital structure tactical trade-on that stood to benefit from volatility in the merger. So far, we have profited over these headlines.
Another theme of late has been corporate issuers taking out some of their short-dated debt early. With interest rates this high, it becomes that much more enticing for cash-rich issuers with strong balance sheets to take out any debt early. Metro, Sobeys and Fortis all redeemed bonds at a premium over the last week. Because our investment profile tends to own shorter dated bonds, we also benefitted from this trend.
1. Equity Volality
2. Interest Rate Volatlity