Hafiz Noordin

[music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing. Every day, I'll be joined by guests from across TD, many of whom you'll only see here. We'll take you through what's moving the markets, answering your questions about investing. Coming up on today's show, we'll discuss whether there is any signs of progress in the fight against inflation and what impact it's having on the economy with Hafiz Noordin from TD Asset Management. And in today's WebBroker education segment, Nugwa Haruna is going to show us how you can find information about high-yield bonds on the platform. So here's how you can get in touch with us. Email moneytalklive@td.com or you can fill out that viewer response box right under the video player here on WebBroker. Before we get our guest today, let's get you an update on the markets. We are rallying for the second day. It they were losing a bit of steam their bed is holding in positive territory, the TSX, despite the fact that golds under some pressure and oil is under some pressure, in positive territory, almost 118 points to the upside, little more than half a percent. Watching some of the tech names, are they holding onto their games? We have Shopify at 39 points and $0.52, arise just shy of 4%. IAMGOLD in the news today is selling its stake in the Rosebel Gold Mines for a $360 million cash. It's up almost 16%. South of the border, let's check on the S&P 500, the broader read of the American market, building on yesterday's gains. Investors trying to keep the rally alive. Right now, it's pretty much solidly in positive territory, a little more than half a percent. The NASDAQ heading into the noon hour is sort of just hit the breakeven line and bounced off of it, it's in positive territory now, up just about 1/10 of a percent. We see money movement in Carnival Cruise Lines again today, it's up almost 10% the session, $7.97. That's your market update. Many central banks have been delivering jumbo sized rate hikes in an attempt to tamp down red-hot inflation. As we get into the final months of 2022, are there any signs of progress and that fight? Joining us now, Hafiz Noordin, he is a portfolio manager for global fixed income at TD Asset Management. Great to have you back. >> Pleasure to be here. > There's been plenty of pain in equities and bonds this year for investors but all in the name of trying to fight inflation. How are we actually doing on the front? >>wwhen we look at current levels of inflation, that's one of the main performance metrics for central banks. It does feel like there's still a lot of work to do. We had US CPI last week, the print for September, showed that headline may be starting to stabilize but core inflation ticked up again to 6.6%, that's a new high for this cycle. When we drill down into the numbers, it's the service as part of the economy that is driving the bus now in terms of inflation momentum, less side the good side. So all that stuff about supply chains, bottlenecks, shipping cost, that story is starting to weigh in and it's really more the services story. Within that, it's more about housing. Rents, both up a run rate of about 7% now in the US. So really on that basis, it seems like there's a lot of work to do, but I think it's important to take a step back and think about: do we assess central banks on current levels of inflation? Arguably no, monetary policy works with about a 2 to 3/4 leg. So when we look at forward-looking indicators which we really monitor, there is definitely evidence out there that the Titan that they've done so far is starting to have an effect in terms of cooling demand, bringing down inflation going into next year. But where it ends up is still a fair amount of uncertainty. >> Our central bank started the week by releasing their Business Outlook Survey and their consumer sentiment survey as well and I guess if you pushed out far enough on both surveys, there seems to be someplace that the central bank and get things under control but right now it seems to be a bit of concern out there, among consumers and businesses that we areheading for some tough times. >> You are right to point out that long-term expectationsare positive, that's the good news that came out of the survey. 1 to 2 year inflation expectations are still quite high. I think the general take away from the bank Canada's report there was that there's a lot of uncertainty at the consumer level, a business level, in terms of the inflation picture for the next year and even the growth picture. And so for consumers and for workers, that means that they are really looking towards wage growth to help them to buffer that shock. They are demanding higher wages and that's the risk that we really have to look out for, that wage price spiral. If we see higher wages being given out to workers, then businesses will likely pass that on to higher prices for services and goods and then again, that's a second order effect of higher inflation and if that continues in a spiral, that's really where the Bank of Canada can lose control. So I think the key message for investors is that even if growth starts to come down meaningfully, we still should expect the Bank of Canada and most central banks to stay hawkish to prevent that scenario from happening because that's the one where we can really lose control of the economy. >> The last time we heard from our central bank, it was a Friday on the tail end of the IMF meetings where you sort of took questions with the media. Lots of tough talk. But also we hear from these meetings, the gathering of these people charting this course. > A lot of things for them to talk about but I think front and centre is the growth outlook. So twice a year at these meetings, the IMF releases a world economic Outlook, pretty downbeat picture for next year in terms of declining growth expectations and, you know, around 2 1/2 3% global growth, but inflation is staying sticky at about 45% next year. I wouldn't say that really fundamentally changed a lot in terms of the market expectations. Private sector growth estimates and inflation estimates were really kind of bear. But I think what was brought out of those discussions, because of what happened recently in the UK and some other countries, is this fiscal conundrum and I think that's going to be one of the new risks going forward that we really have to watch, this idea that a number of households across the globe at dealing with higher borrowing costs, dealing with higher consumption costs and they are feeling the pain and the pressures on governments now to try to think of how do they buffer the shocks? We saw the UK do it the wrong way, but it doesn't mean that approach to having some sort of fiscal stimulus is gone. That pressure is going to be there, and I think that's the risk to watch in terms of who is next to try those types of measures. >> When it comes to trying to tame inflation, you mentioned shelter costs. But wait a minute, we are seeing headlines about home prices coming down pretty dramatically in the face of higher borrowing costs, but of course higher borrowing costs, you're not getting a break on your mortgage or as a renter. >> Yes, the US is front and centre here because we have seen mortgage rates go up very, very quickly. The 30 year mortgage rate in the US is the one to watch for that market. Just over 7% and that's an over 20 year high. We are definitely already seeing a lot of reduction in homebuyer sentiment, house prices have come down, but the reality is that we haven't seen that show up in the CPI data, you know, the rents are still going up. But I think we should really watch are some of those forward-looking indicators. Below is a good example of alternate data. It does show that the rate of change of rents is starting to come down. So rents are still going up but the pace of appreciation of rents is a bit lower now than it was in the first half of the year. So perhaps a bit of a glimmer of hope there that it's working its way into the inflation data and the tightening measures that have been gone so far will be sufficient. But it's still kind of flew right in. >> Interesting so that you mentioned that the central banks should be forward-looking because the moves they are making right now are trying to affect change down the road. I think Beata Caranci, TD's chief economist, recently was on the show, I was at an event with her, she was sort of saying curious, may be, the way that the central bank seems to be focused on, okay, this inflation… All these things are backward looking. >> That's right, and that's the big challenge for monetary policymakers, it's like driving a car and only looking in the rearview mirror and that's the tough part of that job. I think at the end of the day, one of the things that really came out from the IMF meetings and as they got feedback from investors was that uncertainties are increasing and therefore there is reason to perhaps slow downin terms of the pace of rate hikes, but that said pivot that everyone is waiting for… Everybody is waiting for that, but everything I talk about just now in terms of what we saw from the Business Outlook Survey in Canada at risk of the wage price spiral, that is still front and centre for the central banks and we know that they've been saying they would rather trade-off lower growth or even a recession then let inflation really run away and I think that's what we have to expect going for. >> Fascinating stuff and a great start to the program. We'll get your questions about fixed income for Hafiz Noordin in just a moment's time. Our minor, course, they can get in touch with us anytime. Email moneytalklive@td.com. Or you can fill out that viewer response box under the video player here on WebBroker. Right now, let's say you updated on the top stories in the world of business and take a look at how the markets are trading. Goldman Sachs delivering an earnings beat to as higher borrowing costs helped offset a plunge in investment banking revenue. it's a theme playing out across the Wall Street banks this earnings season. While dealmaking has dropped sharply, aggressive central bank rate hikes are powering a surge in net interest margins. Goldman Sachs also announcing plans to reorganize the business into three units, asset and wealth management, global banking and markets and the fintech focused Platform Solutions. Microsoft is cutting jobs in the face ofa sales slowdown. In a statement to several media outlets, the software giant said it continues to make structural adjustments to its business, adding it will hire in key growth areas in the coming year. This news follows job cuts in July that accounted for less than 1% of Microsoft's workforce. Changing consumer habits in the face of soaring inflation are hitting the bottom line at Hasbro. The toymaker's latest earnings came in below Wall Street estimates, with the company pointing to increasing price sensitivity for the average consumer. Hasbro is also dealing with elevated levels of inventory. The toymaker says it plans to work through that inventory through the holiday season. Let's check in on Bay Street and Wall Street now. We'll start here at home with the TSX Composite Index building on yesterday's rally. Right now, you are pretty much holding on hundred and 30 points the upside, three quarters of a percent. The same story on Wall Street. Let's check at the S&P 500. They are off the highs but firmly in positive territory, of 33 points in the broader read, a little shy of 1%. We are back now with Hafiz Noordin, we are taking your questions about fixed income. Let's get to them. This is the question of the season. We get this one all the time. What are your thoughts on GICs versus short-term bonds? People are asking about GICs for good reason because there hasn't been a reason to look at them until now. >> For sure, and it's part of that broader part of the portfolio which we call cash, right? Cash rates, because a central bank rate hikes, have gone up so you are being paid to wait, you are being paid for that liquidity in your portfolio. And it's always prudent to have some amount of liquidity, especially now when there is volatility in the market, opportunities are starting to come up that are attractive over the long run. So yes, cash allocation it makes sense. You have to make the distinction between cash you have available right now to date to deploy versus something like a GIC where, depending on the structure, GIC would lock in your capitalfor certain period. And have to think yourself, during that time, will there be opportunities in the market I would like to capitalize on and will affect capital available? Or will you be paying a penalty to get that capital to deploy? I think that's number one when we are thinking of GICs is yes, you are getting some of that higher level of income, but you're locking it in. I would say that in bond portfolios, there are similar structures that provide the liquidity, but you have the ability to earn that income and still deploy quickly. And when he think of constructing a bond portfolio right now, to your bonds are earning 4 to 4 1/2%, but you can sell it add to any time in order to buy equities or corporate bonds, whatever else you might buyif you see other opportunities,. It's really just about thinking about the liquidity trade-offs versus the income trade-off. >> We often hear people say, you know, people want to capitalize on opportunities. the big questions are,why might you need money and when might you need this money? >> Everyone has a different investment horizon so you have to think about that and it's important to, you know, you have that plan that you develop in terms of what are your cash needs in the future and if you feel that you have cash that you don't need for a long time, then a GIC or similar structure might make sense but for investors when most of your total return opportunity does come from equitiesand other risk assets, knowing that risk assets have sold off so much this year, maybe there is still somewhere to go, you are getting to a point where it will be prudent to start linking into some of these risk assets in order to improve your total return opportunities over the long run. >> Great stuff to think about on that question. Here is one about the other end of the curve. Is it time to buy the long bond? >> Yeah, for sure, and you know, it's always a question we get because of high levels of income, and it's always important to think about it in a broad portfolio instruction process where you think of risk factors. What are the risk factors that you get from long bond? There is the income component, but there is also the duration or interest rate risk. This year, interest rate risk has not been working well because of rate hikes. And now, a lot of those rate hikes have happened. There is still somewhere to go, but when we take a step back and look at you know 4% yield in the US or 3 1/2% in Canada at the thirty-year part of the curve, that's a pretty decent level of income, but the optimality you get out of the exposure to that part of the curve is if we get into a recession, especially deep recession, long bonds are where you want to be because you will see declining inflation expectations and most likely declining central bank rate hike expectations and the asset class or the part of the curve that really benefits is the long bond. So I think we are at the point where some allocation does make sense. It does, like you said, time horizon matters, but for long-term investors, the risk reward is starting to shift more positively for the long run. >> Interesting stuff there too. Here's what's being a real driver of so many asset classes this year: this US dollar strength we have been seeing. Any signs that the US dollar strength is coming to an end? >> Is been the quality asset class in an environment where bonds have not been, so the US dollar certainly has everything going for it right now, the Fed is hiking, the US growth is still fairly resilient despite all of the headwinds we are seeing and being a flight to quality currency, it's attracted a lot of flows globally. The other flight to quality currencies are the Japanese yen, this was Frank, but those currencies have had a lot more issues, particularly the yen where monetary policy is not doing anything so you are not getting any level of income there. So the flow into the US dollar, I don't see any reason for that trend to turn anytime soon until we do see growth getting more resilient in other parts of the world. We have to see the euro zone, China, Japan, those countries we need to see more growth and we are just not seeing it yet. So I think for now, the US dollar still has that role to play of flight to quality but, you know, currency can be volatile and I think an active management approach to managing a currency portfolio is critical because the US dollar has gone expensive, so I think watching for some of those catalysts of when the US dollar trade is done is important. >> Talking about the US dollar has come up a few times when the show was guests talking about your dollar, our problem. Obviously, the US dollar having an effect on so many asset classes, has become a problem for other economies? >> It does for other economies, but the US won't care. The Fed is not going to lighten up on its policy because it's a worry about other economies having a problem paying their US dollar liabilities or is seeing higher financing costs in their countries. So other countries just have to keep up. Even in Canada, Maclin made the comment last week that they are watching the US dollar. And you don't normally see the governor talking about the currency but it is on everyone's mind that if you are another developed market that trades a lot with the US or has a lot of linkages with the US and the US dollar appreciates, you are actually importing more insulation into your economy, so you have to then keep pace with the Fed. So absolutely, everyone is watching this and with the exception of Japan where they seem to just have no problem letting the young go to 150, most countries are pretty mindful that they have to keep pace with inflation. >> Interesting stuff as always. At home, always make sure to do your own research before making investment decisions. We'll get back to your questions for Hafiz Noordin on fixed income in a moment. You can get in touch with us anytime. Email moneytalklive@td.com. Now let's get our educational segment of the day. If you're interested in researching high-yield bonds on WebBroker, while there are tools on the platform that can help you. Joining us now forMoore, Nugwa Haruna, Senior client education instructor at TD Direct Investing. Always a pleasure to have you. Let's jump in. Where do we find this information on the plot from? >> Always a pleasure being here. Yes, fixed income products are all the rage, especially bonds because the rising interest rate economy that we find ourselves in. So for investors who are looking to find bonds and specifically high-yield bonds, they are able to access that information with WebBroker Pierre the top into WebBroker and take a look at where investors can find this. Once in WebBroker, investors will click research. Under investments, will go fixed income. Now, investors who are curious to know what the differences between a regular bonds in a high-yield bond, well, high-yield bond is another name for them, they are also known as noninvestment rate bonds and investors can find a list of them by clicking on high-yield. What this will do is open up a list of high-yield bonds in WebBroker. These are bonds that tend to below rated by the leading credit rating agencies in terms of being able to pay back the capital invested. Then investors who go ahead and invest in these, they require a higher potential return for the risk that they are taking on. So then, investors are able tosee that returns are on the higher side potentially, with upwards of 20% of their return, but investors want to be aware thatat the same time, you are taking on much higher risk than investment-grade bonds when exploring days. As unattractive as these may seem though,they are actually highly traded by investors who are looking once again to get thatpotential high return. >> A great wealth of information there on the platform. Now how can investors actually place a trade for high-yield bonds WebBroker? >> Right. So for investors looking to purchase high-yield bonds, because of one of the risks of high-yield bonds which is liquidity, investors would need to call a TD bond trading desk to purchase these. So investors who are looking for an alternative who still want to place a purchase on WebBroker, they can potentially do this by going into WebBroker, but this time clicking on research and they could consider using either mutual funds or exchange traded funds whose category is high-yield. So I clicked on the exchange traded fund option here and we are going to go under category. And so once here, investors could actually find exchange traded funds that focus on investing in high-yield products.. In the space, there are 28 of them. Once you click on it, investors can filter down to that information by going to the left-hand side here and filtering by performance for the last five years, investors could consider looking at the holdings or the MorningStar ratings as well. So just an alternative for investors who actually do want to go ahead and make these purchases online. I will mention that if investors want to learn more about the differences between bonds and high-yield bonds, October is investor education month and investors are able to attend the offerings that we at TD Direct Investing have for our clients by going to TD.com/IEM, there we have a list of different events there. If you are more of an investor who is just starting off or an investor looking to learn more about income earning, we do have something from everything, ranging from webinars, live master classes as well as our videos that we produce. >> Nugwa Haruna, Senior client education structure at TD Direct Investing. Check out the learning centre in WebBroker for more educational videos, live interactive master classes and upcoming webinars. Before you get back to your questions about fixed income for Hafiz Noordin, a reminder about how you get in touch with us. Do you have a question about investing or what's driving the markets? Our guests are eager to hear what's on your mind, so Sen. questions. There are two ways you can get in touch with us. You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just writing your question and hit send. We'll see if one of our guests can get you your answer right here at MoneyTalk Live. We are back now with Hafiz Noordin, take your questions about fixed income. Let's get to another one off the platform. What should an income investor look for in the fixed income sector? What's the screen, I guess, here? >> We talked about high levels of income at the short end of the curve because the yield curve is now inverted. We know that two year bond yields are really among the highest across the curve, and so government bonds are attractive there and very is safe and I think we could take a step further and look at high-quality corporate bonds at the short end of the curve, and particularly looking at AA or singly rated companies here in Canada or the US that issue senior bonds. You know, you can get yields north of 5% from very high quality, very low default risk companies. And so from our perspective, given where we are in the cycle, knowing that a recession is a potential outcome for next year, you don't want to be in really low credit quality companies that have really high-yield, but you want to find that sweet spot in the middle where you have, you know, you are landing essentially with companies that have strong balance sheets and weather the storm over the next year or two, and you are earning north of 5%, that's a pretty good risk reward in my view. >> It might be because of my financial media background but every time we enter earnings season, my mind always goes to the equity side of the equation, and how did the stock react, up or down, based off the earnings, but something struck me recently that really if you are a fixed income investor, earnings season is pretty important as well going through those reports and finding out one of the harbingers of quality if you are thinking about that. >> And so when we think of our philosophy of fixed income investing, it's really bottom up credit research that you need: a really doing that due diligence in terms of the balance sheet and income statement and ensuring that you will get your money back and your coupon payments. And so that's the trick to corporate bond investing that it's not just a blanket strategy, you have to know who are the right companies to be lending to you and we are on the yield curve is the optimal point to be lending to that company. And so that's where I think when we go through earnings season, we really do a lot of analysis to ensure that we know we are covered in terms of our interest payments. And so I think when we look at the higher-quality end of the spectrum, those AA, single a rated companies, even some of the triple B companies, telecom companies or some pipelines in Canada, all very strong and all have very resilient business models and, you know, they've all gotten cheaper in terms of their credit spread so it's actually pretty good opportunity to be deploying capital to those types of companies. >> Interesting stuff. Let's talk about fixed income opportunities in other parts of the world. Do you see any fixed income opportunities in the emerging markets right now? >> Well, you know, we talked a lot about the headwinds for global growth and inflation and with the Fed hiking, all of that typically has been a bad combination for emerging markets historically, and I don't think this time will be different in that sense. When we think of EM broadly, add to that also China which is kind of in this right right now in terms of low growth and until they can really, out of there zero COVID policy, low growth has also been bad for EM historically. So I think as an added asset class as a passive investment strategy, I'm not too constructive on EM, but I think their pockets of opportunity where an active strategy makes sense. Brazil is a good example where we saw them get really proactive and really credible in how they handle their monetary policy over the past year, even though there was a lot of political noise, they were able to hike rates well above 13%, whereas inflation peaked out at around 10% earlier this year. So when you take the difference between their policy rate and inflation rate, that's a positive 4%, that's a real yield, and you really can't find a 4% real yield anywhere in terms of both the emerging market and the developed market. Most emerging markets are at a zero real yield, Canada and the US it's more like -4%. So there opportunities like that where you can get a high level of income. You do have to take exposure to the currency, so that's one of the risk trade-offs that you have to think about in a portfolio. >> And also the political noise too. >> That's right. I was a little bit more concerned a few weeks ago before the first round when the range of outcomes was a bit wider. what we did see after the first round is that it's really come down to the two candidates, the incumbent president Bolton Aro and the ex-president da Silva who is running again. The outcome most people are worried about is that da Silva would come in and have control of the Congress two. What we have seen is that the Congress will be more centre or right-leaning. Da Silva, if he comes to power, will put in a lot of aggressive policies to ratchet up debt anddeficit levels. So we actually could see a good outcome politically, even those going to be a hard-fought battle. And for that reason, I am constructive on Brazil. >>fascinating stuff. You need to know a lot about the world to do a thesis job. This is a great question to follow it up with. Can we get an update on what's happening in the United Kingdom right now? Talk about flipping and flopping a policy. >> Yeah, so I alluded to the IMF kind of calling this out a little bit in a broad sense. It has taken a lot of investors attention this last couple of months. I think we all know the story in terms of the meeting budget that became a major issue for the country, and then on top of that, the leveraged exposure of the UK pension community. What we have seen now is that with the removal of the previous finance minister and Jeremy Hunt now in the position has really reversed all of those policies that were causing the problem, all of those corporate and household tax cuts that were really unfunded and not sustainable in terms of their debt trajectory. So I think it's a good outcome in that the market forces worked in terms of driving them to the right policy past from a fiscal perspective, but I think there is still the question of leadership. There is a leadership crisis in the UK right now, and on top of that, there's obviously a lot of pressure domestically to do something about the hit to household income and household wealth coming from energy and coming from inflation. So I think that's the issue that everybody still watching and that risk premium in the UK will probably still be there for the near term. As you talk about the divergent and you mentioned earlier too because you have the monetary policy and the past seems pretty clear for most Western nations and then some fiscal response where the politicians feel they need to help people but obviously in the British example it was the wrong medicine it, how dangerous is that for the rest of the world right now? You don't want to see a political response from some quarters, it may be a dangerous response. >> Yes. So I think the lesson from the UK is not to rush into it and not just appease the broader public. You have to really do these things in a targeted way, think about who is most vulnerable in society and who needs targeted stimulus versus broad-based stimulus that impact households and corporations across the spectrum and then on top of it doesn't even have a proper funding strategy in place for those six managers. And that's what the IMF's message was, not to avoid any fiscal stimulus but to do it in a prudent way and make sure that all the lines will is what monetary policy is trying to achieve. >> Fascinating stuff. What about your questions for Hafiz Noordin on fixed income in just a moment's time. As always, make sure you do your own research before you make any investment decisions and reminder you can get in touch with us at any time. Do you have a question about investing or was driving the markets? Our guests are eager to hear was on your mind so send us your questions. there are two ways you get in the hutch with us. You can set us an email anytime at moneytalklive@td.com the or you can use the question box right below the screen here on WebBroker. Just writing your question and hit send. We will see if one of our guests can get you your answer right here at MoneyTalk Live. It was a red-hot month in Canada. Putting shovels on the ground to buildnew homes. Housing starts in September jumping to their highest level since November of last year. Joining us for more is now money talks Anthony Okolie. >> Thanks. As you mentioned, the annual pace of homebuilding in Canada was red-hot last monthand they came in at just under 300,000 annualized units last month and that marks an 11% month over month increase from August healthy numbers. An Septembers jump was led by increases in the multifamily category which can range from a duplex to a small apartment with up to four individual units. Meanwhile, when you look at single detached homes, they came and flashed in September and interestingly, urban starts were highly concentrated in three out of the 10 provinces. You can see on the chart I brought along with me, Ontario was a big driver of Septembers against with urban starts up about 35,000 units to 131,000 in September. Other gainers included BC and Alberta up with 50,030 9000 units respectively last month. Meanwhile, starts fell by more than 4000 units for the Prairie provinces, the Atlantic region also took a hit along with Québec, were starts came in just under 40,000 units. TD Economics says the robust jump in home building activity in September will support residential investment and overall economic growth. However, the bulk of the gains in the urban starts came mainly from Ontario, so pretty concentrated in Ontario, which take some of the shine off the headline number. >> So we see this big jump in September month over month. We are at the highest levels since late last year. When TD Economics takes a look at the path forward, what are they thinking about? >> They don't think this pace can be sustained going forward. They think it's red-hot, it's most likely going to trend downwards. Particularly given that home sales have been going down, interest rates have been rising at pretty fast clip. They do believe that some offset should come from robust population growth here in Canada. They are forecasting for urban starts to go on a downtrend over the next little while, but they are expected to stay healthy throughout 2023. >> Great stuff, thanks Anthony. >> My pleasure. >> MoneyTalk Anthony Okolie. Let's say you updated on the market action right now. We started the day firmly in a continuation of yesterday's rally. We are holding onto it. 18,762, have the TSX up hundred and 41 points, three quarters of percent, despite having negative goal today and some financial pressure on crude prices. We've got the American benchmark down almost 4% at this hour, 82 bucks and change with the Canadian market hanging in there. Let's look at some famous reporting. Nutrien is still in positive territory, hundred and 12 bucks roughly a share, up a little bit more than 2%. Did notice some weakness though in the lumber and pulp producers, including Canfor, right now at 19.74, down about 1.7%. South of the border, the S&P 500 is hanging in, building in yesterday's rally, at 3712, a little shy of a percent. Let's check on the tech heavy NASDAQ. There has been is some interesting news. They fell to the breakeven line around noon but it has bounced back and now up hundred and 12 points, a little bit more than a full percent. Bank of America, pretty much got all the Wall Street banks out of the way as they kick governing season, has seen some movement into the big names. A bank of America at 34.62, 3% to the upside. We are back now with Hafiz Noordin from TD Asset Management and we are talking fixed income. I like this question because I want people who are new to different parts of the investing universe, we are all new to something, to learn what's going on. What is meant by coupon on a bond? >>that's the cash component of your income on a bond. When you here about a bond and the return you are going to get, you often hear about the yield, which you get from the cash part, the coupon, but it can also come from how much you paid for the bond upfront versus how muchyou get at the end. If you get $100 back at the end and you lend $100 upfront, all of your yield comes from the coupon, the cash coupon that you're going to get every year. But in some cases, if the cash coupon is less than the bond yields, then that means you will pay less upfront for that bond, it's a discount bond, so some of your yield comes from that smaller coupon and the rest of your yield comes from the appreciation of the bond back to 100. Conversely, if you are paying, if you have a higher coupon, you will lend more upfront to to her that higher coupon but you will only get your hundred dollars back in the end. So that's the difference between a cash coupon versus the yield of the bond. At the end of the day, it's the yield of that matters in terms of just providing an indication of your total return opportunity for the bond. > Great stuff. As I said, if you are new to any kind of investing in the space, we have a whole range of viewers. Throw in your question. We are happy to answer them. Let's talk about investment-grade bonds again. What is your view on 5 to 10 year investment grade bonds? > I talked about investment grade corporate, that's generally where I think there is good opportunity when it comes to risk reward for credit risk and getting that credit spread over government bonds. I think when you look at the 5 to 10 year point of the curve, there are a couple of things to consider. On the higher side, you have a higher credit spreadin the 5 to 10 year part of the curve in terms of what you might get versus the lower end of the curve. Let's say a bank might have a credit spread about 120, 130 basis points at the two year part of the curve, but at the 5 to 10 mark, it might be closer to five or 10. But you also have to remember that the 5 to 10 year part of the curve also has that interest rate risk exposure. So in an environment where the Fed or the Bank of Canada has to keep rates at a restrictive, the most restrictive level for a longer period of time, the 5 to 10 year part of the curve yields will be affected. Even though your credit is higher, you may submit an impact in terms of a price return from yields going up. So for that reason, I would say that the shorter end of the curve, the 2 to 5 year part of the curve is a little bit more attractive in terms of all in yield and less likelihood of yields being priced upward by central bank action. >> Okay. Nugwa was on earlier showing us how to research high-yield on the platform. Someone wants to know what is your outlook for high-yield? Heading into a recession, is this risky? >> There's definitely a lot of attention on high-yield because the all in yield for bonds right now is 5 to 10% which sounds attractive. Historically, when you look at the total return opportunity, say one year or two years out for high-yield with the starting points, it's usually pretty good. But I think we have to remember if this cycle is that when you break down at 9 to 10% yield for high-yield right now, about half of that, about 500 to 600 basis points at that, is the credit spread, but the rest is the government bond yield, the underlying government bond yield of those high-yield bonds. So that 5 to 600 points of credit spread is probably consistent with a non-recessionary environment, the average spread of a non-recessionary environment. as we have been talking about, the risk of a recession is still meaningful. If we do get into a recession and especially if it's a deep recession next year, that credit spread instead of 5 to 600, could be eight, nine, even a thousand basis points, so we could see yields may be 4 to 5% higher than they are now and the reason would be that default rates would go up in the high-yield market because those corporate's house less strong balance sheets. So I think there is reason to still be cautious going high-yield. I would still favour investment grade more, but I think the opportunities are there over the next year to get exposure to some of these companies that, over the long run, still provide pretty good total return options. >> We are running out of time for questions but before you go, we want to ask you for your final thoughts. It's been a tough year across asset classes, including bonds. How should investors be thinking about the path forward? >> Clearly, there has been a lot of hit in terms of investment returns this year and bonds and equities and I think at the end of the day, it's about having a patient plan over the long run and starting to recognize that the entry points right now, both in fixed income but also across different asset classes has gone a lot more attractive than earlier in the year. And so it's important to have some cash, wait for some opportunities that come up, but right now, we do see there are opportunities to get into fixed income at attractive levels of yields, but make sure you know what's in that fixed income. Is that fun taking a lot of risk in high-yield or be more prudent in investment grade? Understand what is underneath that strategy is critical. >> It was great to have you. It's always an insightful conversation. Hafiz Noordin, the portfolio manager for global fixed income at TD Asset Management. Stay tuned, tomorrow, Chris Medeiros, portfolio manager at TD Asset Management will be our guest to take your questions about asset allocation. On Thursday, Bryan Rogers, Senior client education instructor at TD Direct Investing will join us. We will take your questions about how to better use the WebBroker platform. So make sure to get all discussions in ahead of time. Email moneytalklive@td.com. Of course, you can send them and while the show was running as well. That's all the time we have for today. We will see you tomorrow. Thanks for watching. [music]