A global bond sell-off has pushed borrowing costs to multi-decade highs across major economies this year, but Canada’s corporate debt market has weathered the storm better than most of its international peers — even as record-setting foreign issuers increasingly use Canadian dollars to fund their own ambitions.
Canada’s Bonds Hold Up in a Global Rout
The U.S. 30-year Treasury yield has climbed to levels last seen in June 2007, hitting 5.24 per cent — up 37 basis points since the start of the year. Canada’s equivalent 30-year government bond yield has also risen to nearly 18-year highs but stands lower, at 4.16 per cent, up 24 basis points over the same period. Britain and Japan have fared worse still: the 30-year Gilt yield reached 5.77 per cent, a 28-year high, while Japan’s 30-year yield climbed to 3.98 per cent.
“Canadian bonds look quite well-behaved in the global space,” said Konstantin Boehmer, portfolio manager and head of fixed income at Mackenzie Investments, noting the tight correlation that typically exists between U.S. and Canadian yields. Derek Brown, managing director and head of fixed income at Beutel, Goodman & Co., attributed part of the divergence to fiscal discipline, pointing out that the U.S. has averaged federal deficits of around 6 per cent of GDP in recent years, compared with a combined federal-provincial deficit of roughly 3.5 per cent of GDP under Canada’s federal budget. Brown characterized U.S. stimulus as a “sugar rush” of tax cuts, contrasting it with Canada’s emphasis on infrastructure spending on ports, pipelines and rail, which he called “a much more healthy type of stimulus.”
Corporate Credit Outperforms Government Debt
Within that steadier backdrop, Canadian corporate bonds have done even better than government issues. The S&P Canada Investment Grade Corporate Bond Index has edged up 0.7 per cent since the start of the year, while the Canada High Yield Corporate Bond Index has gained nearly 3.4 per cent. Brown said long-duration buyers such as insurers and pension plans searching for higher yields have helped cushion the sell-off at the longer end of the corporate credit curve, and that credit spreads — the premium corporate borrowers pay over government benchmark yields — have not widened as much as might be expected given higher oil prices and rate expectations.
Issuance has also been brisk. Hanif Mamdani, managing director and head of alternative investments at RBC Global Asset Management and manager of the PH&N High Yield Bond Fund, described an “explosion of issuance” from companies that had not previously tapped the high-yield market, estimating roughly $30-billion of “high-yield-like” corporate debt issued over the past 18 months.
Record Foreign Issuance and New Market Plumbing
Unlike the U.S., Canada has largely avoided the wave of debt tied to artificial-intelligence spending that has flooded American corporate credit markets. Reuters, citing BNP Paribas data as of Aug. 10, reported that AI hyperscalers issued US$220-billion in debt in 2026, up from US$12.5-billion a year earlier. Avi Hooper, a senior adviser to London-based research firm ABP Invest Ltd., said Canada’s corporate issuer base — dominated by financials, energy companies and pension funds — is “basically very high quality, very positive free-cash-flow-generating companies,” a structurally different mix from the tech-heavy borrowing surge south of the border.
That has not stopped global technology firms from tapping Canadian-dollar markets directly. Amazon sold C$14-billion of bonds in Canada, a record for Canadian-dollar corporate issuance, while Alphabet followed with a record A$5.5-billion Australian-dollar deal, part of a broader pattern of U.S. hyperscalers diversifying funding beyond the U.S. dollar market as capital needs grow. Meta Platforms is separately preparing its first bond sale in Europe this autumn as part of the same trend.
Market infrastructure has also evolved: the Bank of Canada announced a multi-year agreement with CanDeal Data & Analytics to use its Reference Pricing service for Canadian dollar-denominated fixed income securities, supporting the central bank’s monetary policy, financial system and funds management functions, including its Canadian Collateral Management Service. “This data will support the Bank’s monetary policy, financial system and funds management functions,” said Phillipe Muller, senior director of the Bank of Canada’s Markets and Banking Department, adding it would help the Bank manage collateral and liquidity “particularly during periods of severe market-wide stress.”
What Comes Next for Yields
Most market participants do not expect the run-up in long-term yields to extend much further. Boehmer said long-end yields are “at a pretty good spot,” with U.S. long real yields around 3 per cent. Brown, however, cautioned against expecting a return to the ultra-low rates of the past decade and a half. “We have exited the post-great-financial-crisis paradigm of ultra-low interest rates,” he said, adding that investors are still adjusting to a higher-rate environment that more closely resembles historical norms.
This article is for informational purposes only and does not constitute financial, investment, or legal advice. Consult a licensed financial advisor before making investment decisions.
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