Scott Colbourne

[music] >>Hello I'm Greg Bonnell and 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 will only see here. We we'll take you through it's moving the markets and answer your questions about investing. Coming up on today's show: if central banks truly are near the end of their rate hiking cycle, what does it mean for fixed income? Will discuss with Scott Colbourne from TD Asset Management. And in today's WebBroker education segment, Jason Hnatyk will show us how you can find information about corporate earnings on the platform. Plus MoneyTalk's Anthony Okolie will tell us about the new TD Securities report on the housing market. You can email us anytime at moneytalklive@td.com or Philip that your response box right here on WebBroker. Now let's get you updated on the markets. There are some green on the screen here on both sides, let's start at home on Bay Street. the TSX Composite Index, triple digit gain of 101 points. Risk appetite out there on both sides of the border playing with some of the tech names including Shopify here at home. some sentiment seems to be shifting in a positive direction around Shopify in recent days. Some weakness and some of the mining stocks though, let's check on Lundin, down a little less than 1/2 a percent. The S&P 500, of course the thick of earning season with heavy names on deck this season and next week you get the Fed meeting. We have our own central bank meeting this week and will get to all that in just a moment's time. Right now you do have some appetite for stocks, the S&P 500 up more than 1 1/3%. As we said, this risk appetite seems to be benefiting some of the tech names. The NASDAQ outpacing the broader market in terms of gains right now at least it was a couple of seconds ago. Will call at 2%. Let's take a look at AMD, up more than a percent. That's a market update. With markets weighing whether central banks are close to the end of their rate hiking cycle, there's been a growing focus on the potential opportunity in fixed income. For more on that we are joined by Scott Colbourne, Managing Director for Active Fixed Income at TD Asset Management. Welcome back to the program. >> Thanks Greg. >> This is supposed to be the year. We've been talking about this for several months but the opportunity in fixed income, if certain things happened in the market this year, how are we set up? >> Well we anticipated a reasonably good year fixed income. If I can only annualized the last three months, it would be even better. So over the last three months, the markets, broad bond markets are up. I would not expect that in an annualized performance going forward but you are still talking about very good yields both in the government bond market and corporate bond market. You know, as a firm, we have generally liked fixed income for a while. So, we are coming towards the end of the rate cycle. At least in North America and in emerging markets. Europe and Japan and maybe elsewhere. But at the moment we are coming in towards the end of that, sort of, rate hiking cycle with one or two more going forward and we will see from there. >> Is not really the base condition right now? Indeed we do get that scenario played out where we are expecting more hikes from our central banks including our own but then they get that certain point and I guess the market is betting they are very close to that and they stay there for a while? Is that a base condition for fixed income to work in our favour this year? >> We talked about pace and the pace is becoming a dead issue. We are at the end of it. So now it's the destination. At the Fed, the markets are debating between a one or two more hikes this year. Bank of Canada is one hike. Then the question is, how long we will stay there as you proposed. Within a year, we've got to 2 to 3 cuts and in seven or eight years we have more . . . . The bond market is a dead issue. It has come and gone whether the tips mark the real term bond market or the tips fixed income market. Really inflation is not an issue. So it's a question of growth. Are we going to sort of land in this Goldilocks soft landing? Where inflation has come down a lot, central bank step back, start cutting, the labour market softens up, the wages settle in nicely and off we go and we have a great risk market in the outgoing market? So that's the debate we are having right now. A transition. How long will that steady rate hike before we pivot to any cuts? And what it means for the economy. And there is definitely a lot of uncertainty in that frame of reference. >> The bond market, of course you have the central banks working and doing what they are doing pretty aggressively to the last year. Perhaps the curve feels a little more… As we get further out of the yield curve, what is the market telling us about the economy? Where they think we are headed in this economy? >> When you look at financial indicators, we've talked about for a long time, flashing red. It's a leading indicator of a recession. We have leading economic indicators like this morning that also reinforce this. But then you step away and you look at some of the harder data and it's a little less clear in terms of whether we are flashing red in terms in a recession. And this is where I think people are landing in terms of the Outlook at least right now. It looks like a soft landing. Maybe a recession light. But nothing to worry ourselves too much about and let's put aside, for a variety of reasons, the big yield curve inversion and we will move on from that. Central banks will pivot quickly. >> I want to talk about that. Some people saying, the naysayers who don't believe in the narrative will say "hey if you get central banks cutting within six months and if something goes horribly wrong in the economy, you lay out the pricing we are seeing in the market it actually seems like we will get those cuts at the end of the year according to the market. It's not to be because we are in a deep recessionary hole. So kind of just mellowed out. Is that a bit of a Goldilocks? >> And that's a tough landing to nail right? It doesn't happen very much in economic history. Is this a transitory Goldilocks? It's a way of looking at it. That the degree of uncertainty is very high. We've had a lot of uncertainty coming out of the pandemic. Incredible monetary policy, fiscal policy. If sort of ripped the bandage off of financial… Where interest rates are kept low and inflation is high. Now in the bond market, there were positive yields where inflation is going, with that it creates a lot of uncertainty in terms of the outlook for free economic growth, inflation. You know, the economic growth pattern around the world. The US dollar. So you sort of ask "where are we going and how rather are we gonna land on that Goldilocks"? It's my personal opinion. So I'm keeping our investments very flexible and mindful of the fact that it's going to be, a lot of spray student for the good news story of a lot of cuts. I don't think it's in a play out the way that the market thanks. But within financial repression coming out, positive rates and lots of uncertainty, it's going to be a very challenging market to navigate. > Is the market paying enough attention or perhaps individual retail investors paying enough attention to the other parts with the central banks and what they're doing? The second the central banks always a great announcement with 25 or 50 and what they will do but what if somebody wants to tighten outside of just the overnight rates? The pulling back of the bond and all that kind of stuff? The balance sheet roll off? Is that being factored in enough? >> That is continuing. The broad drain of liquidity ahead of the broad risk on markets. I would add to that quantitative tightening. The ECB will step into that as well. You have other central banks stepping in to the withdrawal of liquidity in the markets. ECB will be going and they have a number 5 to 6 hikes priced into the market. You know, it's been topical over the last couple of weeks. The Bank of Japan. I think most observers think that the Bank of Japan will step away from its yield curve control in some fashion and in fact the bond markets are priced in over the next year or two hikes. So you have that broad setback of liquidity whether it's the Fed or ECB or the Bank of Japan. And that's gonna be a headwind against the broad risk on markets. So from an asset allocation point of view, it's going to be choppy and uncertain. And that's what investors should take away I think. We had a tremendous rally in the bond market. I don't think this rally continues with the same pace. But I still think it's very attractive. Look, worst-case scenario, rates go back up. Given where yields are right now, given where you lose in terms of prices, probably worst-case scenario this year is zero. But on the other side, you are either clipping a coupon between three and 5% which is a great thing or you've got a little bit of a recession hedge, particularly if you own longer data bonds. The economy slows down. We do get the Fed and the Bank of Canada cutting and you have that insuranceSo I think it's a reasonable place to buy bonds. Maybe not the same return over the last two months but it's not bad and I think withdrawn liquidity with the Fed, ECB or Bank of Japan, that is support. >> Fascinating stop and a great start to the show. We will get to your questions on fixed income with Scott Colbourne in just a moment's time, including Outlook for corporate bonds, GICs and how in fixed income will fare in a handled recession. A reminder that you can email us anytime, moneytalklive@td.com or fillet that your response box. Now it's take a look at some headlines in the world of business and see how the markets are trading. Microsoft is announcing a multibillion-dollar investment artificial intelligence. The software giant is says the deal represents the third phase of its long-term partnership with OPEN AI, the organization behind CHAT GPT. Microsoft didn't give an exact dollar value but it did give it a multiyear, multibillion-dollar investment to accelerate AI breakthroughs. Music streaming service saponify plans to lay off some 600 workers representing 6% of its staff. In a memo to employees, saponify CEO Daniel X says he was too ambitious making investments in the company ahead of expected revenue growth. Saponify is among several tech firms announcing layoffs in the face of a tougher ad market and overall economy. It's another big week for corporate earnings with high profile names such as CN Rail, Visa and Tesla on deck to report. Investors are keeping a careful eye on any commentary from corporate leaders about the economy, recession fears and what it could mean for earnings. Let's check in on the markets with Bay Street, we are in positive territory, not as firmly as at the top of the show, 73 points a little more than 1/3 of a percent. South of the border, the S&P 500 with a 45 point game, that brought a read of the American market up more than a four and 4%. We are back now with Scott Colbourne, taking your questions about fixed income today. So let's get to them. >> Corporate credit has been an attractive place all in yield. There's a little debate as to whether the spreads compensate that well. So government yields a gone back up, spreads upon up. They come back down since their peak in late last year. Both in the investment grade market in the high-yield market. So the question is sintering around the outlook and what we've been touching on is in the case of a bigger slowdown in the economy, a recession or harder landing, the spreads in the corporate credit market perhaps at these level still compensate you enough for that scenario. But if we centre on the sort of Goldilocks soft landing, if you will, all in yields, it's a good place to be and that's consistent with the rally in the credit market. Consistent with the rally and the equity market here. Broadly speaking, we like it, the fundamental's are good. But we are kind of concerned as we move into the vulnerability towards the economic outlook going forward. As whether the spreads themselves are compensating you enough. >> If investors are doing their homework on corporate bonds and heading into this certainly, we don't know exactly where this economy is in a land this year, what should we be looking for, what should they be looking for the financials and the balance sheet Mark >> It's very similar to what you look at on the equity side. You want a good balance sheet so you want an overlap or company. The ability to refinance or pay the debt back, which is key for bondholders, repayment of debt. And the extent of leverage of a business, business revenues in your income. So those are broad metrics. In most cases the investment market offers you a brother a walk wide range of… A lot of good companies in that space offer you attractive place to invest and I would right now, we are particularly focused on credit in that one to five area. I think we can be compensated a lot. It is attractive. Further up the curve it's a little more uncertain but given the yield curve shape of government yield, high-yield, close to 5% in the US and then offered attractive yield on top of that, it's a great place to park money even with the uncertainty as to whether or not we are going to recession or not. >> A tough long recession that we can claw her way out of is the biggest risk? > Yeah. I think a big challenge. The Fed will be forced to, you know, go on pause after the next two hikes and then has to step in again given perhaps accommodation of a recovery, a warmer winter in Europe, China reopening, commodity market filling up again and you're forced to step into that and that's going to ultimately you know, drive the economy lower. Even the Fed is forecasting an increase of the employment rate with its last summary. That is going to be a challenge going forward in the market. >> Okay next question. Trying to get a bit of a global focus. >> Pretty wide open. So I talked about corporate credit and the short end so that's a nice place to be. But stepping away from that, emerging markets are an interesting strategy to invest in. It's been a great run to start the last few months, the US dollar has come off its strength. As inflations become less of an issue, as the central banks of indicated and stepped back. With that, that sort of broad sense of a cyclical lift into non-US dollar currencies, the emerging markets have done well. So I would say that a Mexico or Brazil or Columbia, Indonesia, these are all markets that we've invested in. They are attractive yields. Anywhere from 7 to 13% depending on where you are and currencies that, even if they holding steady, relative to the US dollar, the Canadian tar, they are offering a very attractive pairing. We sort of put this tempering whether it's the bond rally in the government yields or selling off the US dollar, we've come very far, very fast in the last few months. In the first three weeks of this year. It will be a great place to invest over the course of this year, timing in terms of executing that has to be something you watch and I would sort of urge a little bit of caution in the short term. >> Is the US dollar the big wildcard if we are talking about any kind of emerging-market asset class? Some people may be scratching their heads thinking that there was going to be more strength in the US dollar in the past couple of months than has been in store. >> Soft landing thesis… The fact that we've got China reopening we've had a warmer winter in Europe… The Bank of Japan is more confident, you can make an argument that it's lifting. And broadly speaking, when you see global growth lifting, the US dollar goes off. It's not so much like it's the end of the US dollar dominance right? It's just the fact that global growth, other currencies benefit. The euro is benefiting… The young will benefit… Emerging markets will benefit. So I think that is broadly the trajectory we are going. Just be mindful of the pace three weeks in. We had a heckuva run here. You have to be mindful but broadly speaking the thesis is the US dollar is weaker, the Fed on hold. We will see whether they cut but even if they don't I think it's still positive for global growth. We have a modest decline in inflation. It's not the issue it was last year so all positive things. >> Okay another question now. >> Good. if we ever get back on the 60/40.the place you want to be right? If you really wanted to protect yourself, we had an incident last week when we had the big selloff in the equity market. We also had bond markets rallying a lot. We haven't seen a lot about last year with the markets are preoccupied. You had yields going up in price going down and equity prices in a positive correlation between prices and stock market. This year, we saw hints of that correlation changing and when you go back to what bonds do for you, it provides you with income, so better income, it provides you with liquidity. But the correlation part of the portfolio starting to become a part of the dynamic again. So in a recession, if we do see a hard landing, the long end of the US government bond market, Canadian bond market will rally a lot more that will be a positive and you definitely want to be in that long government bond to hedge the risk part of your portfolio. >> Iron number last year and bonds were going down, equities are going down, we get questions on the show >> . . . It was a horrible year and we have not had inflation like this for a long time. They went hard and they went aggressively. Now as we are transitioning away, the correlation is starting to reassert itself and we will see going forward, it's not a layout but it's starting to be an important part of the hedge. >> And always at home make sure to do your own research before making any investment decisions and we will get back with your questions with Scott Culbert in just a moment's time. A reminder that you can get in touch with us any time by emailing moneytalklive@td.com. Now our education segment. We are in the thick of corporate earnings season and if you're looking to find info, WebBroker has info. Joining us now with more is Jason Hnatyk, Client Education Instructor at TD Direct Investing.… >> Great to be back here Greg thanks for having me. We are always looking to be kept informed of what's going on. We have protections from the companies and endless alike. But we really need to be kept with those unknown events becoming known so we are not caught off guard and we have the right information to make those decisions. So I bring you in the platform now to show you where you can get an ample amount of information. Within WebBroker, we will go up to the "research" tab of the top of the page and under markets, you can select, here there is a wealth of information available at a click of a mouse. Not only are we gonna get access to earnings information, we have dividends, splits, ratings changes so lots of other information that the investor needs to know about. Additionally, you have the opportunity to pick a date into the future. So if you're looking for a particular company or particular announcement from the bank of Canada or fed for instance, you have that ability to look into the future for that. Then we also have the opportunity to look either at the Canadian side of the border or looked down south to see what's happening with those US listed Securities. So from here, wherein a focus in our earnings. You can see, let's take the top name on the list, IBM reporting today. We have the opportunity to see that their announcements will cover, the opportunity to see the analyst expectations, also seeing past events appearing so lots of great information. We can help understand how it's going to stack up versus expectations versus past performance so lots of great information. >> So we rely on that information and we know we will get the announcements from the companies interested in tracking us. You put that to work. How do you get more information? >> Yeah. We want to scratch way below the surface and WebBroker has more tools to really keep you informed. So from the page we are already on, we found a company we are interested in. Let's keep the thread going here. We can go ahead and click on the symbol and here we have an overview section. Let's not sleep on the overview page because there's lots of information whether we are looking to find out some fundamental information or looking to find out about yields or even just when the earning information comes out. This is gonna be the first place to go to actually bring up to get opinions from people across the market. A lot of good information. But if we are looking to continue on with the events calendar, we are looking at a particular company, the events tab will be here as well. You have the opportunity to get that same information and we have a earnings which we are focusing on dividend splits etc. That's all here for us with the ability to look back, importantly, how things have been in the past and how things are tracking and how we can look from period to period as well as how things are looking year-over-year. So lots of great information about estimates and actual reports. So a good first step that information. Additionally, there is an earnings tablet you want to make sure we can highlight because it's right on topic. In this area, we have the opportunity to look back and see how past earnings are doing. You notice this on the left-hand side, how the actual reports have been. Then we also get the opportunity to look in the future on 1/4 by quarter basis to see what the expectations are versus what the range of the analysts are projecting. So we are able to see exactly how we are trending so we can once again build that whole pictures we can see and not be caught off guard and then invest with a full amount of information. >> All right. Information is always key. Thanks Jason. >> My pleasure. >> Jason Hnatyk, Senior Client Education Instructor at TD Direct Investing. On a programming note, make sure you turn in Tuesday for Caitlin Cormier, Client Education Instructor at TD Direct Investing taking your questions on how to better utilize the WebBroker platform. Of course you can always check at the learning centre on WebBroker for more interactive videos, live master classes and upcoming webinars. Before we get back to your questions with fixed income with Scott Colbourne, a reminder of how you get in touch with us. Do you have a question about investing, or what is driving the markets? Our guests are eager to answer your questions so send them to us here at MoneyTalk Live. You can send your questions two ways: you can send us an email any time at moneytalklive@td.com or you can use the question box at the bottom screen right here on WebBroker just type your question and hit "send". We will see if one of our guests can get you the answer right here at MoneyTalk Live. We are back with Scott Colbourne, taking your questions about fixed income so let's get back to them. [reads question] >> It's a great question. You have to think about what your scenario is if we take the inverted yield curve is in some sort of recession or harder landing, you have to think two ways about this right? From your portfolio construction, are you an investor or are you a trader? Some sense the recession, it means rates are lower than when they were priced into the market and from a trade construction point of view, you want long duration. That can give you a huge bang for your buck in terms of total return yield income. But I think from just a simple whole strategy buy and hold strategy for fixed income a great strategy for many investors, rolling down the yield curve right now, buying short and credit which gives you an incremental yield over the government bond market, offers you a great opportunity to reap that 5 to 6% yield range. So you know, really, what does the investor want to do for the overall portfolio construction? That's something they have to decide. Some of it, it's just a very set and look at it when it matures. There's definitely huge opportunity in buying five-year bonds. Buying five-year corporate credit and just waiting for that to mature and reinvest when the opportunity sets and then. >> Is that a difference in point of view when I guess looking at the yields at the front end of the curve? Or the opportunities for price appreciation for a downward curve? Two different variables running against each other. >> When people look at offers to fixed income investors, we talk about yield all the time right? Whether it's GICs or government bonds. Whatever. You just get the yield right? But the capital gain of the price movement can be a huge incremental ACT! or a negative to your portfolio given the price appreciation the yield market. That, we've had seven… 7% return in three months that's a huge equity like return. Obviously a big component of that is price appreciation from a decline in yields often peeking before 4 1/4%. So you gotta really understand where your total return is coming from your overall portfolio. >> Okay. You mentioned there, we have a question coming in about GICs. Do you think the rates can go higher and GICs? >> I think eating it very close. My daughter invested in a GIC over the weekend. I think you see GICs as the Bank of Canada. If the economic environment changes towards the second half of the year, that's a separate question. But I think you reached the peak in those heels between four and 5% which are locked in. You don't get any price appreciation that we are talking about. If you're locked in in November, you have 5 1/2%. Great. But there's no price appreciation. You are locked in in the meantime, buying an aggregate bond market index is going to be 7% already in three months. So there is debate in terms of how you want to structure portfolio. How do you think a portfolio in construction? Set it and forget it or renewed in a year? Let the income and not worry about capital… As a part of your portfolio, that really is an important question to ask. There is tax advantages to buying individual bonds. There is liquidity in buying bond funds. There is liquidity by bond ETF's. So there really, it comes down to how you manage your portfolio. How do you structure portfolio? How do you think about total returns and how you're gaining? Weekly? Quarterly? Yearly? Those will help you drive your thesis in terms of investing. >> Good points on that. Let's take another question. >> Yes. Broadly speaking, it's an important part of the portfolio. We talked about the hedging component. The fact that can offer you a recessionary hedge if something does come to play in terms of a harder landing. That's a really important thing. You know, just from an annualized basis, we've talked about the fact that you're getting reasonable yield in your income right now. Let's say things do go against you over the course of this year, that income can offset any price depreciation. So you know I sort of set out to potential for total return of zero. Which is not a bad thing. In the scope of portfolio construction on a downside. So I've always, I think it's very important to have them in your portfolio. >> Some people are concerned about the amount of debt that got the governments to God during the pandemic. Do we think about those debt levels when we are talking about sovereigns? >> Well the temperature is starting to turn up south of the border on this issue. Right? We have a dysfunctional house. We have the debt ceiling debate becoming more of a focus for investors. We have reached the threshold of the debt… Until about June. Now the debate is whether the house, you know, pushes the US government into a technical (…) So it absolutely matters. What's driving this in terms of the markets attention is more the antics in terms of the government and what they are trying to achieve on both sides of the house. So it's something from a risk point of view that we've encountered in 2011, 2013. It is real and it can have quite a distinct… On the market. If realized. It's not something to be dismissed at the moment given the political environment we are in. >> We will get back to your questions with Scott Colbourne on fixed income in just a moment's time. A reminder to do your own research before making any investment decisions and you can get in touch with us any time. Do you have a question about investing, or what is driving the markets? Our guests are eager to answer your questions so send them to us here at MoneyTalk Live. You can send your questions two ways: you can send us an email any time at moneytalklive@td.com or you can use the question box at the bottom screen right here on WebBroker just type your question and hit "send". We will see if one of our guests can get you the answer right here at MoneyTalk Live. TD Securities recently hosted its 2023 Canadian financial services conference focused on the Canadian housing and mortgage market. Anthony Okolie joins us now to discuss some key highlights and trends from that panel discussion. Anthony. >> Thanks so much Greg. The panel focused on these key things. Three key things. Market Outlook, credit trends and capital regulation. We will start with housing market activity Outlook. In line with the bond market, but made stable up modestly. Now the panel also notes that commercial landing broadly commercial lenders rather broadly continued for core clients but that lenders are more selective when lending to new clients. They also mentioned that same agency regaining some residential mortgage in insurance market share that they lost back in 2021 to private insurers. They noted that CMH C had about 46% market share back in 2019 before the tightening of their standards in mid-2020. Of course due to the pandemic. Another key theme as I mentioned, credit trends. Some expect that they will move higher but panels are cautiously optimistic on the outlook. Going forward. One panelist expects that an increase and loss ratios for mortgage insurers… Employment trends rather made a key factor. Finally construction lending, a lot of these construction projects are showing a higher degree of cost overruns and low profitability. The final theme is capital and regulation. The private lenders with access to debt facilities are expected to fare better versus those with no access to lending facilities. In particular, smaller private lending firms with fixed rate mortgages and no access to credit facilities are less competitive. And finally, capital requirements for mortgage insurers have increased, that's really driven by transition by IFR S, 17 which is a new account with mortgage insurers being asked to hold capital against variable rate mortgages. Greg? >> I understand the panel also talked about the recent moves from the bank. Perhaps trying to reduce mortgage demand. What you take on that? >>… Requires financial institutions and mortgage brokers underwriting practices. One standard suggest that the measures are not necessary. They suggested that the benefits of the established stress test will be visible over the next few years. That the market is already contracting or pulling back. Any further regular, regulatory tightening will likely push into a private lending space which is already some capital constraints there. >> Interesting stuff when you talk with housing market in this country. Thanks Anthony. >> My pleasure Greg. >> MoneyTalk Live's Anthony Okolie. Let's check it on the markets. The TSX Composite Index a little shy of 1/2 a percent gain. Let's see some of the big energy majors. Did notice some weakness and some of the mining names though on Bay Street, including B2Gold. We will call that a 2% pullback. South of the border, there seems to be some missed appetite to start the trading week. The S&P 500, and that the governing season 50 points. Good for one of the quarter percent gain. The tech heavy NASDAQ seems to be outpacing the broader market and indeed, it's up to the tune of 1.9%. Some of the chipmakers making gains. Let's check in on a Nvidia. Up to the tune of 6%. Hundred and $89 and change. We are back out with Scott Colbourne from TD Asset Management talking fixed income. Let's get back your questions. (Reed's question) maybe even I will throw in a little slaver of that. We will be moving in tandem? Or a bit different on this path? >> Good question. Right now the markets is essentially they will be on the same broad path. So let's just call it a gap of about almost 50 basis points between the US and Canada in terms of where they will settle in, short-term interest rates, on hold for about six months or so second half of this year. We will debate in terms of getting some cuts in. So in a years time, we've got may be one to three cuts priced in. But over the next two years, we've got basically 2%. So let's say the Fed gets defied, it will be a 3% in two years. If the bank of Canada gets to form 1/2, it will be about 2 1/2. So that's what the markets priced in and we've only got that six-month pause. I mean, we've touched on the housing market with Anthony. There are reasons to debate as to whether the cycle will be a little bit more severe were the impact of interest rates here in Canada on the housing market and what that means for the consumer. Real key is the health of the market in Canada and the United States. That something will be watching very closely in terms of wages, changes in total hours worked. We have little hints so far that both markets are softening a bit. But we will be walking watching rather. Watching the reaction both from the Bank of Canada and the Fed that there is a potential that we could diverge. So far the markets are saying no. >> The softness of the labour market. It's been said the consumer needs to slow down the labour market needs to soften and bring inflation down. To what extent that we think in 2023, either the Fed or BOC will be comfortable with that pain in the labour market? If it means real pain, the people will lose those jobs? >> One of the things you been trying to grapple with, particularly as we have interest rates where they are, typically, that feeds through into a lot more weakness into the housing market. And one of the push me pull me is here, we have definitely seen a pullback on the equity side and the sentiment. But you really haven't seen a lot of layoffs in the housing market. The homebuilding market and the structure market. Potentially, that's being offset by the stimulus program set up by the US government. In terms of infrastructure rebuilding. So a typical response in terms of layoffs in that part of the market, having fed through given the stimulus that we see on the fiscal side, so that feeds into the narrative of "well, if we are not to get any cyclical, adjustment of the housing market and layoffs on that side of things, and the market stays tight, maybe the Fed won't be cutting 2% over the next couple of years. So this is what we are sort of trying to slice and dice. We will be watching the behaviour of the employment market, particularly on the cyclical side of the employment market. >> We are almost at a time but we will squeeze one more question in. (Reed's question). >> High-yield market gives you broadly speaking the index. Very attractive historically. Over that 8 to 10% range makes sense. Adding when we see weakness in higher yields in a higher yield makes sense. It just depends on your outlook. And we are a little bit cautious. Investment grade over high-yield because if we do see more of a risk on the downside in terms of the economy, spreads can widen out a little bit more relative to the US market. > Always a pleasure to have you Scott. Great conversation. >> Thanks very much Greg. > Our thanks to Scott Colbourne, managing director of Active Fixed Income and TD Asset Management. On Tuesday, Caitlin Cormier, Client Education Instructor at TD Direct Investing will be our guest take your questions about how to better utilize the WebBroker platform. Including how to buy GICs on the platform. A reminder of course to get a head start in your questions like we did today. Email us at moneytalklive@td.com. That's all the time we are for the show today. Thanks for watching and we will see you tomorrow. [music]