You are currently viewing the Canadian Institutional website. You can change your location here or visit other RBC GAM websites.

Welcome to the RBC Global Asset Management site for Institutional Investors
Français

In order to proceed to the site, please accept our Terms & Conditions.

Please read the following terms and conditions carefully. By accessing rbcgam.com and any pages thereof (the "site"), you agree to be bound by these terms and conditions as well as any future revisions RBC Global Asset Management Inc. ("RBC GAM Inc.") may make in its discretion. If you do not agree to the terms and conditions below, do not access this website, or any pages thereof. Phillips, Hager & North Investment Management is a division of RBC GAM Inc. PH&N Institutional is the institutional business division of RBC GAM Inc.

No Offer

Products and services of RBC GAM Inc. are only offered in jurisdictions where they may be lawfully offered for sale. The contents of this site do not constitute an offer to sell or a solicitation to buy products or services to any person in a jurisdiction where such offer or solicitation is considered unlawful.

No information included on this site is to be construed as investment advice or as a recommendation or a representation about the suitability or appropriateness of any product or service. The amount of risk associated with any particular investment depends largely on the investor's own circumstances.

No Reliance

The material on this site has been provided by RBC GAM Inc. for information purposes only and may not be reproduced, distributed or published without the written consent of RBC GAM Inc. It is for general information only and is not, nor does it purport to be, a complete description of the investment solutions and strategies offered by RBC GAM Inc., including RBC Funds, RBC Private Pools, PH&N Funds, RBC Corporate Class Funds and RBC ETFs (the "Funds"). If there is an inconsistency between this document and the respective offering documents, the provisions of the respective offering documents shall prevail.

RBC GAM Inc. takes reasonable steps to provide up-to-date, accurate and reliable information, and believes the information to be so when published. Information obtained from third parties is believed to be reliable, but no representation or warranty, express or implied, is made by RBC GAM Inc., its affiliates or any other person as to its accuracy, completeness, reliability or correctness. RBC GAM Inc. assumes no responsibility for any errors or omissions in such information. The views and opinions expressed herein are those of RBC GAM Inc. and are subject to change without notice.

About Our Funds

The Funds are offered by RBC GAM Inc. and distributed through authorized dealers. Commissions, trailing commissions, management fees and expenses all may be associated with the Funds. Please read the offering materials for a particular fund before investing. The performance data provided are historical returns, they are not intended to reflect future values of any of the funds or returns on investment in these funds. Further, the performance data provided assumes reinvestment of distributions only and does not take into account sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would have reduced returns. The unit values of non-money market funds change frequently. For money market funds, there can be no assurances that the fund will be able to maintain its net asset value per unit at a constant amount or that the full amount of your investment in the fund will be returned to you. Mutual fund securities are not guaranteed by the Canada Deposit Insurance Corporation or by any other government deposit insurer. Past performance may not be repeated. ETF units are bought and sold at market price on a stock exchange and brokerage commissions will reduce returns. RBC ETFs do not seek to return any predetermined amount at maturity. Index returns do not represent RBC ETF returns.

About RBC Global Asset Management

RBC Global Asset Management is the asset management division of Royal Bank of Canada ("RBC") which includes the following affiliates around the world, all indirect subsidiaries of RBC: RBC GAM Inc. (including Phillips, Hager & North Investment Management and PH&N Institutional), RBC Global Asset Management (U.S.) Inc., RBC Global Asset Management (UK) Limited, RBC Global Asset Management (Asia) Limited, BlueBay Asset Management LLP, and BlueBay Asset Management USA LLC.

Forward-Looking Statements

This website may contain forward-looking statements about general economic factors which are not guarantees of future performance. Forward-looking statements involve inherent risk and uncertainties, so it is possible that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement. All opinions in forward-looking statements are subject to change without notice and are provided in good faith but without legal responsibility.

Accept Decline
by  D.Fijalkowski, MBA, CFA, D.Mitchell, CFA Sep 20, 2024

Dagmara Fijalkowski, Head of Global Fixed Income and Currencies, shares her view on central banks and interest rate cuts. In addition, Dan Mitchell, Senior Portfolio Manager, dives into what’s driving the rally in the Japanese Yen.

Watch time: 4 minutes, 58 seconds

View transcript

Dagmara Fijalkowski: How have expectations of Fed rate cuts impacted bond yields?

By the time you're seeing this video, the fed will have joined other central banks in cutting interest rates. when they started the hikes in 2022, the objective was to bring inflation back to 2% from levels as high as 9% without, if possible, putting the economy in a recession. While it took over two years, fed governors must be pleased with the results.

So far, so good. The question now is at what pace should fed funds rate be reduced? The July dot plot, which is representing fed governors economic projections showed the median expectation among governors for one cut this year, with the most dovish governors expecting two cuts. Since then, the market went as far as pricing five cuts by year end. There's a big discrepancy between the markets and the fed, and one could argue that the markets have priced too many cuts.

I prefer to think about it, however, as the market weighing two very different scenarios. One, the fed hoped for a scenario of soft landing with inflation falling and growth resilient. That would be justifying two, perhaps three, cuts by year end and subsequent gradual reductions of fed funds rate. The alternative scenario of a recession, with continued and steep increase in unemployment rate, plummeting growth would be necessitating deep and rapid cuts by the fed over the next year, with significant front loading. Market weights the two scenarios and ends up with the unlikely number of 4 or 5 cuts by year end.

As a result, bonds rallied alongside the entire yield curve, with short maturity yields falling more than long maturity yields, leading to the long awaited bullish steepening of the yield curve. The gouges of the economy that we monitor will line up more alongside the soft landing scenario. So our view on bonds in the short term is that the rally has been overdone and the neutral duration stance is warranted.

Dan Mitchell: What is driving the rally in the Japanese Yen?

The big mover in foreign exchange markets this summer has been the Japanese yen. The currency is up 13% since the beginning of July and is now testing its 2024 highs. That's been a very painful move for foreign exchange traders globally, as they've been shorting the yen in order to capitalize on the difference between near zero interest rates in Japan and much higher levels of yields that are available elsewhere in the rest of the world.

So in an otherwise quiet foreign exchange market, we've seen this yen move really offer a jolt to foreign exchange traders who have gotten used to these very tight ranges in FX markets, and we've seen them cut their losing positions in the Japanese yen. Now, there's been three reasons for the Japanese yen gain. The first is we've seen some weaker economic data in the United States, and that's really got the ball rolling on expectations for fed interest rate cuts.

That's undermined the U.S. dollar and led to a sort of broad U.S. dollar underperformance against, a spectrum of emerging market and developed market currencies. Second, the Ministry of Finance in Japan has intervened in currency markets. They bought about 37 billion worth of Japanese yen. And that was enough to sort of change the tide of, negative sentiment on the end.

Third, the Bank of Japan has been hiking interest rates. They've finally abandoned their negative interest rate policy and brought their interest policy rates up to levels that we haven't seen since before the 2008 financial crisis. But even after this 13% rise in the yen, we see the yen is still quite undervalued. In fact, it's the cheapest currency in the world.

And so we expect it to continue to rise and for it to be a major influence on the broader U.S. dollar depreciation that we expect. Overall, we think the U.S. dollar will fall substantially over the next couple of years. We expect the euro and the yen to be the main beneficiaries of that decline. And for the Canadian dollar to lag a little bit, offering only 5% to 6% returns over the next year.

 

Get the latest insights from RBC Global Asset Management.

Disclosure

This document is provided by RBC Global Asset Management (RBC GAM) for informational purposes only and may not be reproduced, distributed or published without the written consent of RBC GAM or its affiliated entities listed herein. This document does not constitute an offer or a solicitation to buy or to sell any security, product or service in any jurisdiction; nor is it intended to provide investment, financial, legal, accounting, tax, or other advice and such information should not be relied or acted upon for providing such advice. This document is not available for distribution to investors in jurisdictions where such distribution would be prohibited.

RBC GAM is the asset management division of Royal Bank of Canada (RBC) which includes RBC Global Asset Management Inc., RBC Global Asset Management (U.S.) Inc., RBC Global Asset Management (UK) Limited, RBC Global Asset Management (Asia) Limited and RBC Indigo Asset Management Inc., which are separate, but affiliated subsidiaries of RBC.

In Canada, this document is provided by RBC Global Asset Management Inc. (including PH&N Institutional) and/or RBC Indigo Asset Management Inc., each of which is regulated by each provincial and territorial securities commission with which it is registered. In the United States, this document is provided by RBC Global Asset Management (U.S.) Inc., a federally registered investment adviser. In Europe this document is provided by RBC Global Asset Management (UK) Limited, which is authorised and regulated by the UK Financial Conduct Authority. In Asia, this document is provided by RBC Global Asset Management (Asia) Limited, which is registered with the Securities and Futures Commission (SFC) in Hong Kong.

Additional information about RBC GAM may be found at www.rbcgam.com.

This document has not been reviewed by, and is not registered with any securities or other regulatory authority, and may, where appropriate and permissible, be distributed by the above-listed entities in their respective jurisdictions.

Any investment and economic outlook information contained in this document has been compiled by RBC GAM from various sources. Information obtained from third parties is believed to be reliable, but no representation or warranty, express or implied, is made by RBC GAM, its affiliates or any other person as to its accuracy, completeness or correctness. RBC GAM and its affiliates assume no responsibility for any errors or omissions in such information.

Opinions contained herein reflect the judgment and thought leadership of RBC GAM and are subject to change at any time. Such opinions are for informational purposes only and are not intended to be investment or financial advice and should not be relied or acted upon for providing such advice. RBC GAM does not undertake any obligation or responsibility to update such opinions.

RBC GAM reserves the right at any time and without notice to change, amend or cease publication of this information.

Past performance is not indicative of future results. With all investments there is a risk of loss of all or a portion of the amount invested. Where return estimates are shown, these are provided for illustrative purposes only and should not be construed as a prediction of returns; actual returns may be higher or lower than those shown and may vary substantially, especially over shorter time periods. It is not possible to invest directly in an index.

Some of the statements contained in this document may be considered forward-looking statements which provide current expectations or forecasts of future results or events. Forward-looking statements are not guarantees of future performance or events and involve risks and uncertainties. Do not place undue reliance on these statements because actual results or events may differ materially from those described in such forward-looking statements as a result of various factors. Before making any investment decisions, we encourage you to consider all relevant factors carefully.

® / TM Trademark(s) of Royal Bank of Canada. Used under licence.

© RBC Global Asset Management Inc., 2024
document.addEventListener("DOMContentLoaded", function() { let wrapper = document.querySelector('div[data-location="inst-insight-article-additional-resources"]'); if (wrapper) { let liElements = wrapper.querySelectorAll('.link-card-item'); liElements.forEach(function(liElement) { liElement.classList.remove('col-xl-3'); liElement.classList.add('col-xl-4'); }); } })