Canada’s growing retiree population expected to suppress bond yields

Over the next decade, 3.5 million people will reach retirement age — the biggest increase in that cohort in Canadian history. And that means trouble for the economy.

That retirement wave comprises “nearly 1,000 [people] per day, every day, for 10 years,” says Jeff Waldman, head of Global Fixed Income and managing director at CIBC Asset Management. He’s co-manager of the Renaissance Short-Term Income Fund, an underlying fund in the Renaissance Optimal Portfolios.

“To put that in context, that’s like creating five cities the size of Winnipeg or Quebec City over the next decade, just full of new seniors.”

That demographic shift in Canada will hurt GDP, and by extension, investment yields.

“Assuming there’s no surprise increase in productivity, exports or immigration, the economic drag from retiring boomers is estimated at 1.25%,” he says. “That means that real GDP could be stuck at the low 1% range over the next decade. And that’s going to impact interest rates.”

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