Q: As a follow-up to my previous question, why would higher inflation / interest rates in the USA cause the price to go down of XBB shares which hold 100% Canadian government, provincial, and corporate bonds?
5i Research Answer:
Credit markets in North America are very closely linked. Moves in US bond rates are often mirrored in Canada. While we have had three rate cuts in Canada vs only one (larger one) in the US, Canadian bond yields have indeed ticked up over the past few weeks, hurting some bond prices.