After posting mostly negative returns in 2013, mutual funds in Canada that invest in fixed income securities performed well in the first month of 2014 amid heightened volatility in equity markets around the world, says data from Morningstar Canada. Most of the world’s stock indexes ended the month in negative territory, but a steep depreciation of the Canadian dollar meant several foreign-equity fund categories were able to eke out positive returns in January. “The first two weeks in 2014 were quiet for global equity markets, but negative headlines in late January increased volatility. The flight to safety started with poor economic growth data from China, combined with concerns about the country’s government debt,” says Achilleas Taxildaris, a Morningstar fund analyst said. “This in turn adversely affected developing market currencies, some of which depreciated sharply in a matter of days, forcing central banks to raise interest rates in an effort to stop their fall.” All seven of its fund indices that measure the aggregate returns of bond funds were up in January. Funds in the precious metals equity category, which were the biggest losers last year, also benefitted from the month’s volatility.
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