Market Update

John BraiveVice Chairman, CIBC Global Asset ManagementMay 2010

2 2

Economy: Global Outlook

-1

0

1

2

3

4

5

6

7

Japan Europe Emerging Europe

U.S. Canada Latin America

Developing Asia

Emerging Asia

Low growth

High growth

While fiscal austerity is not an option, the timing could not be worse: Potential growth is set to slow markedly in the developed world.

Tightening efforts on the fiscal front will act as an additional source of drag on growth.

Potential GDP Growth Over the Next 10 years (2010 to 2020) & Fiscal Drag

3 3

Economy: U.S. Personal Income

Income growth has been exceptionally weak.

This expansion faces structural headwinds.

The destruction of household wealth should act as a stimulant for household saving.

The consumer won’t be the engine of growth.

4 4

Economy: U.S. Industrial Production

The manufacturing sector is recovering from its near death expansion of a year ago.

Auto sales are starting to rise and are expected to rise 10% in the next year.

Capital equipment spending is also improving as corporations update their technology.

100

104

108

112

116

07M07 08M01 08M07 09M01 09M07 10M01 10M07

Current Expansion of Industrial ProductionAverage of Last Six Expansion

U.S. Industrial Production Expansion vs. Average Expansions

Source: Datastream & CIBC Global Asset Management Inc. Calculations

Assuming recession ended in June 2009 (=100)

5 5

Unit labor costs are the best determinant of future inflation.

The huge overhang of U.S. unemployed will keep wage pressures contained.

Developed markets have little potential for sustained inflationary pressures.

Inflation: U.S. Unit Labour Costs

6 6

Interest Rates: Fiscal Deficits

Source: CIBC Wholesale Banking

7 7

Interest Rates: Canada 30 Year Gov’t Yield

Interest rates remain in their downward channel.

Rising rates would hurt the US housing market and the consumer.

Large supply will be a constant worry.

CIBC GAM forecasts a range of 3.50% to 4.50%.

3

4

5

6

7

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

Government of Canada - 30 year yield

Source: Datastream

8 8

Interest Rates: Consensus vs Reality

2

3

4

5

6

7

2002 2004 2006 2008 2010

Consensus Forecast (+1Y) Actual

The consensus view calls for 10-year federal bond yields at 4.10% - well above our forecast.

For the last decade, consensus has always been too pessimistic on Canadian bonds.

Canadian 10Y Bond Yields: 1Y Consensus Forecast vs. Realized

Source: CIBC Global Asset Management Inc.

9 9

Yield Curve - 30yr less 2yr

The yield curve remains steep.

Good for financials and governments.

Central banks should be cautious raising administered rates.

European sovereign debt risks will remain high.

Interest Rates: The Yield Curve

Source: PC Bond, a business unit of TSX Inc.

10 10

Investment Outlook

Conclusion: No dramatic change in bond yields

Secular Economic Outlook POS Protracted deleveraging

Inflation Outlook POS Wage costs will remain low

Monetary Policy NEG Policy will tighten, but gradually

Fiscal Policy NEG Deficits, deficits, deficits

Demographics POS Sociological shift to savings

11 11

Expected Returns: Yield Forecasts

Mar 31 ’10Economic Expansion

Sluggish Recovery

Failed Recovery

% % % %

Bank Rate 0.25 2.25 1.25 0.50

2 Year 1.73 3.25 2.75 1.25

10 Year 3.57 4.25 3.50 3.15

Corporate Yield 3.95 4.55 3.75 4.45

Corporate Spread 1.23 0.65 1.00 1.95

RRB Yield 1.51 2.10 1.75 2.25

12 12

Expected Returns: Global Market Forecasts

Expected returns for the period ending March 31, 2011In Canadian Dollars In local currency

Economic Expansion Sluggish Recovery Failed Recovery Economic Expansion Sluggish Recovery Failed Recovery

Probabilities 20.0% 55.0% 25.0% 20.0% 55.0% 25.0%

Canada Money Market 1.3% 0.8% 0.4% 1.3% 0.8% 0.4%

Canada Govt. Bond -2.0% 3.5% 4.9% -2.0% 3.5% 4.9%

Canada Corp. Bond 1.7% 6.0% 2.0% 1.7% 6.0% 2.0%

Canada RRB -2.4% 1.7% -7.8% -2.4% 1.7% -7.8%

International Govt. Bond -4.0% -2.3% 19.1% 0.9% 3.4% 5.2%

Canada Equity 22.3% 7.7% -14.3% 22.3% 7.7% -14.3%

United States Equity 11.2% 7.0% -3.6% 17.3% 9.6% -16.9%

International Equity 21.9% 2.4% -6.5% 24.8% 7.1% -14.8%

Emerging Equity 28.1% 12.6% -14.7% 25.2% 12.6% -17.6%

13 13

– The default rates implied by current credit spreads are well above historical averages.

– Corporate Canada came into the recession in good shape, and still is relatively healthy.

Why Corporate Bonds Offer Good Value

Source: Bank of Canada

14 14

Canadian mid-term corporate spreads over mid-term government bond yields (in basis points) – Despite having

declined from their highs, credit spreads are still above their historical average, providing a good buying opportunity.

Why Corporate Bonds Offer Good Value

Source: PC Bond, a business unit of TSX Inc..

Dec’07Credit Spreads at “crisis levels”

S&P500 @1460

15 15

0

300

600

900

1200

1500

1800

2100

Feb-95

Feb-96

Feb-97

Feb-98

Feb-99

Feb-00

Feb-01

Feb-02

Feb-03

Feb-04

Feb-05

Feb-06

Feb-07

Feb-08

Feb-09

Feb-10

Spreads have spiked to new highs at each major crisis, but have consistently returned to historical averages afterwards.

High-yield bonds remain attractive, and we have added new issues.

Selection is key. We do rigorous credit research on each issuer.

+473

+648

+906Dot-Com

+958

9/11 & Enron

+995

Wcom/Tyco/Actg/Mgmt

+466

+312

Beginning of Sub-Prime Mortgage Crisis

+1094

US Bank Bailout

Plan

+817Russian

Crisis

Bear Stearns Bailout

US Auto Bailout

Plan

+1985

+639

+780

Gov’t Liquidity

HY Inflows

Spread

Year

Source: Merrill Lynch and CIBC Global Asset Management Inc.

Why Corporate Bonds Offer Good Value

US High Yield Spread

16 16

Key Statistics DEX Government Bond Index

DEX Universe Bond Index

CBCY Fund Benchmark*

Average Yield 3.27% 3.49% 4.86%

Macaulay Duration 6.22 years 6.03 years 5.35 years

Average Term 8.98 years 8.76 years 7.78 years

Credit Rating

Investment Grade 100% 100% 80%

High Yield 0% 0% 20%

As at April 30, 2010

* 100% hedged into Canadian dollars

Bond BenchmarksBond Benchmarks

Renaissance Corporate Bond Capital Yield Fund

17 17

Breakeven Inflation (Nominal yield – Real yield)

Source: PC-Bond, a business unit of TSX Inc.

Food inflation scare

Deflation scare

Buy nominals

Buy RRBs

• Think of breakeven inflation as a hurdle rate for RRBs

• The current level is a bit high

• It’s attractive for RRBs at < 1.8%

Interest Rates: Real Return Bonds

Thank You

This material was prepared for investment professionals only and is not for public distribution. It is for informational purposes only and is not intended to convey investment, legal, or tax advice.

The user agrees that TSX Inc. and the parties from whom TSX Inc. obtains data do not have any liability for the accuracy or completeness of the data provided or for delays, interruptions or omissions therein or the results to be obtained

through the use of this data. The user further agrees that neither TSX Inc. nor the parties from whom it obtains data make any representation, warranty or condition, either express or implied, as to the results to be obtained from the use

of the data, or as to the merchantable quality or fitness of the data for a particular purpose. PC-Bond, a business unit of TSX Inc. Copyright © TSX Inc. All rights reserved. The information contained herein may not

be redistributed, sold or modified or used to create any derivative work without the prior written consent of TSX Inc. The material and/or its contents may not be reproduced without the express written consent of CIBC Asset

Management. ™ CIBC Asset Management is a registered trademark of Canadian Imperial Bank of Commerce. ™Renaissance Investments and "invest well. live better." are registered trademarks of CIBC Asset Management Inc.

© 2010 CIBC Global Asset Management Inc. operates under the name of CIBC Asset Management in Canada and is a member of the CIBC Group of Companies.