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<v ->I'm Jen Nevin,</v>

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and today we'll be discussing the latest edition

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of the "Canso Market Observer".

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Today I'm joined with Jeff Carter and Jason Bell.

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Thank you guys for joining me.

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So let's jump in.

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Jeff, how have Canadian bonds done relative to US,

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and what do we expect going forwards?

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<v ->Sure, I guess I'll make a couple observations.</v>

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First of all, if you look at the front end,

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the very front end of both the US Treasury

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and the Canadian curve,

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US yields have dropped quite a bit more

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than Canadian yields this year.

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We've all seen the political pressure on the Fed

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to lower rates, which they have done once this year,

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and there's several more cuts that are priced in

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as expectations into the market.

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One-year US Treasury yields have lowered

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by about 90 basis points this year,

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while Canadian rates have just moved 30 basis points.

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In fact just yesterday the Canadian Central Bank

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actually came out and said that

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the current level monetary stimulus is actually appropriate

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for the market.

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So really it's a tale of two Central Bank boards.

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Further up the curve,

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if you look at the 10 and 30 year sectors of the curve,

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really Canada has rallied.

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Not to quite the same extent as the US,

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but it has rallied substantially.

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And I think really the message there from the market

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is that right now,

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Canadian-US yields relative to other G7 countries

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actually look quite attractive.

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In the long run,

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I'd say we expect when the US reverses course

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and yields normalize to higher levels in the US,

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we expect the Canadian to follow suit

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and sell off along US yields.

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<v ->And Jeff, what are investors doing</v>

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to boost yields in their portfolios?

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<v ->Sure Jen.</v>

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I think one of the things we've seen

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in the credit market this year

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is the classic reach for yield.

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That is, investors are willing to buy

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lower credit quality bonds and loans

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for ever lower yields.

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If you look at the fourth quarter of the last year

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in the US high yield market, it was soft.

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This year, we've seen nothing but buying,

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pushing prices higher and higher.

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In fact, the total return year to date

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in the US high yield market is approximately 11%.

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Meanwhile, new issue high yield deals coming to market today

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are coming with coupons of 5% or even lower.

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We think that tells us that there's quite a bit

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of frothiness in the market and that it warrants caution.

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And when we think about our investors' capital,

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we don't wanna have weights that are too high

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in the high yield market.

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We think there'll be better opportunities

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further down the road.

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<v ->And Jason, what do lower yields mean</v>

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for Canso's portfolios?

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<v ->Well, look, investing is a relative game.</v>

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You're trying to do the best you can

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with the cards that you're dealt.

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And so today's environment

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is a low interest rate environment.

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It makes things a little more difficult for us.

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We have to search a little bit further,

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a little bit harder for value,

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and be a little more skeptical.

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But ultimately we're trying to seek value

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where it's available.

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The other thing we like to tell investors,

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and this is a common misnomer,

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is that yield isn't your entire return.

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You can have a yield of 3% of portfolio,

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that doesn't mean you're gonna return 3% this year.

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If you go back to 2007,

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Canso's Corporate Value portfolio was yielding 5%.

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In the year 2009, that same portfolio earned 26%.

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So those two things don't have to be correlated,

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'cause there's always opportunities when yields change,

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to take advantage of falling bond prices.

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And that's what we try to do at Canso.

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<v ->Well, thank you both for joining me.</v>

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For more information,

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go to the Canso Funds website

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and read the latest edition of the "Canso Market Observer".