By Ambrose O’Callaghan
Fixed income markets have been influenced by key factors, including trade and tariffs, in the opening months of 2026. Long and even mid-duration have faced challenges. There is a general perception that volatility has increased. However, implied volatility on the long end has decreased. This is despite intra-month gyrations.
Monetary policy and yield curve positioning
Back in September, we looked at the history and purpose of the United States Federal Reserve.
Where do things stand in early 2026?
Moves in the yield curve of late have been largely policy driven. We could see more signs of broadening growth across the economy, which would likely keep long ends relatively high in the near to medium term. The trade related and tariff issues are a double-edged sword. They cause concerns on inflationary pressures leading to spikey longer-term rates. These also present as issues like we saw at the World Economic Forum when it came to the Greenland crisis. The element of risk premiums for holding US treasuries ebbs and flows around some of the shorter-term policy issues.
Source: Harvest ETFs, January 31, 2026.
As we approach the mid-terms, there is hope that policy-invoked gyrations will subside. Still, they remain a key element for the longer end of the curve. It is the volatile sideways markets that we will see more divergence in covered calls versus the underlying positions, as we have seen through the fourth quarter of 2025. However, option premiums are a key component of the overall total returns.
Source: Harvest ETFs, January 31, 2026.
HPYM & HPYT | Intermediate and long-duration bond ETFs
The Harvest Premium Yield Treasury ETF (TSX: HPYT) holds a portfolio of longer dated US treasury bond ETFs, overlayed with a covered call strategy to generate high levels of monthly income. Longer-duration bonds tend to be more sensitive to any unexpected headlines, which have become a staple of the current US administration.
Source: Harvest ETFs, January 31, 2026.
Implied volatility has moved lower, making the environment more challenging for generating option premiums. HPYT last paid out a monthly cash distribution of $0.11 per unit.
Annual Performance
As at January 31, 2026
| Ticker | 1M | 3M | 6M | YTD | 1Y | 2Y | SI |
|---|---|---|---|---|---|---|---|
| HPYT | 0.06 | (1.94) | 2.49 | 0.06 | 4.04 | (0.18) | 1.27 |
| HPYT.B | (0.62) | (4.42) | 1.61 | (0.62) | (0.92) | - | 2.20 |
| HPYT.U | 0.18 | (1.55) | 3.40 | 0.18 | 5.75 | 1.11 | 0.98 |
The Harvest Premium Yield 7-10 Year Treasury ETF (TSX: HPYM) is a portfolio of intermediate duration US Treasury bond ETFs, also with covered calls to generate monthly cashflow. Mid duration bonds are not subject to the same volatility as longer duration bonds.
Annual Performance
As at January 31, 2026
| Ticker | 1M | 3M | 6M | YTD | 1Y | 2Y | SI |
|---|---|---|---|---|---|---|---|
| HPYM | (0.21) | (0.05) | 2.59 | (0.21) | 5.79 | 2.14 | 2.10 |
| HPYM.U | (0.08) | 0.46 | 3.47 | (0.08) | 7.63 | 3.58 | 3.46 |
TBIL | A dependable cash proxy
Cash alternatives remain a valuable target in a bond barbell for those holding cash. These vehicles can help to rebalance portfolios in an uncertain climate. Because of this, the Harvest Canadian T-Bill ETF (TSX: TBIL) is a high-quality parking spot for cash. TBIL pays competitive interest income that comes from investing in Treasury Bills issued by the Government of Canada.
Disclaimer
The content of this article should not be considered as advice and/or a recommendation to purchase or sell the mentioned securities or use to engage in personal investment strategies. Tax, investment and all other decisions should be made with guidance from a qualified professional.
Commissions, management fees and expenses all may be associated with investing in Harvest Exchange Traded Funds managed by Harvest Portfolios Group Inc. (the “Funds”). Please read the relevant prospectus before investing. The indicated rates of return are the historical annual compounded total returns (except for figures of one year or less, which are simple total returns) including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. The Funds are not guaranteed, their values change frequently, and past performance may not be repeated. Distributions are paid to you in cash unless you request, pursuant to your participation in a distribution reinvestment plan, that they be reinvested into available Class units of the Fund you own. If a Fund earns less than the amounts distributed, the difference is a return of capital.
The current yield represents an annualized amount that is comprised of 12 unchanged monthly distributions (using the most recent month’s distribution figure multiplied by 12) as a percentage of the closing market price of the Fund. The current yield does not represent historical returns of the ETF.
