11:12 AM EDT, 05/06/2024 (MT Newswires) -- Long provincial bond returns were modestly negative in the past month as Government of Canada (GoC) yields moved higher, and spreads widened slightly, noted Bank of Montreal (BMO).

The economy has shown better momentum into early 2024, but the latest round of monthly gross domestic product (GDP) data has come in somewhat less positive -- the bank is currently expecting solid 2.3% growth in Q1. Meantime, a Bank of Canada

(BoC) rate cut is still on the table for June 5, but that's pending another favorable consumer price index (CPI) report.

Overall rate-cut expectations for the year have been dialed back alongside the still-stubborn United States inflation and later/less assumed Federal Reserve easing, pointed out BMO. Over the past six months, long provincials are still outperforming GoCs by roughly 90 basis points; and they are outperforming by almost 4 ppts over the past year.

Long provincial spreads were mixed across jurisdictions over the past month. The full suite of 2024 budgets has now been rolled out, and Canada has entered a quiet period with respect to fiscal updates. Alberta and Saskatchewan outperformed in April with oil prices pushing above $86/barrel (WTI) at one point before pulling back -- Alberta assumed $74/barrel in the FY24/25 fiscal plan.

Elsewhere, British Columbia continues to lag with a pair of negative credit rating outlooks (S&P and Moody's), and continues to trade at the wide end of the three-year range versus Ontario. Manitoba and Quebec have also widened versus Ontario with the fiscal outlooks tilting less favorable, added BMO.