Canada’s corporate bond market is attracting fresh interest from investors and global issuers alike, as rising yields reshape fixed-income strategy and foreign capital flows into the country show signs of volatility.
After years of weak returns, fixed income is being described by some market professionals as offering genuine value again. The 10-year Canada bond was trading near four per cent this week, while the 10-year U.S. Treasury traded above five per cent, according to Sébastien Mc Mahon, chief economist at iA Financial Group. “We are back to something that is normal,” Mc Mahon said, noting that although current rates align with long-term fundamentals, “we haven’t seen those rates for 20 to 25 years. So it’s a regime change for investors.”
Corporate Credit Gains Favour Over Equities
Hadiza Djataou, vice-president and portfolio manager of global bonds at Mackenzie Investments, said the shift has made fixed income “extremely attractive,” arguing that a simple credit ETF in Canada or the U.S. can now yield more than the dividend return on stocks. Djataou said she sees particular value in Canadian corporate bonds tied to banks, utilities and regulated businesses, which she said offer both elevated yields and additional compensation compared with government bonds.
Alex Lee, senior fixed income client portfolio manager at Vanguard Canada, said investor appetite is showing up in flows: year-to-date ETF inflows into fixed income are close to surpassing last year’s total, part of a broader pickup in flows since 2022. Lee said Vanguard does not expect a return to the zero-rate environment of the past decade, adding that “interest rates have normalized to a point where … now fixed income actually provides income to investors.”
Earl Davis, head of fixed income and money markets at BMO Global Asset Management, pointed to specific opportunities within the corporate space, citing Arterra Wines’ roughly five-year bonds, which he said carry a yield of about 7.5 per cent, supported by business fundamentals including expanded wine sales in Ontario grocery and convenience stores. Davis said he favours five-year bonds generally, sees the 10-year nearing a buying opportunity, and remains underweight 30-year bonds given volatility and fiscal risk.
Foreign Investors Pull Back From Federal Debt, Still Buy Corporates
While corporate credit draws interest, the broader picture for Canadian government debt has turned more volatile. Statistics Canada data show non-resident investors sold $17.3 billion in Canadian securities in August 2026 — their first net divestment of the year — driven largely by a record pullback from federal government debt, split between $11.2 billion in bonds and $6.3 billion in short-term paper. That followed $99.4 billion in foreign purchases of federal debt between January and July.
Notably, foreign investors did not retreat from Canadian corporate debt during the same period, picking up $7.6 billion in Canadian corporate bonds and $1.6 billion in provincial bonds in August even as they fled federal paper. Despite the August reversal, non-residents have acquired $161.6 billion in Canadian securities over the first eight months of 2026, more than six times the $27.1 billion recorded over the same period in 2025.
Foreign Investment Flows in Canadian Securities, August 2026
Global Debt Issuance Spills Into Canadian Markets
The appetite for corporate bonds is not confined to domestic issuers. Large multinational technology companies have also turned to debt markets to fund artificial intelligence infrastructure, with some of that activity touching Canada directly. Amazon disclosed in a regulatory filing that it issued $14 billion in Canadian-dollar-denominated notes in June, a record size for the Canadian corporate bond market, according to filings reviewed by Reuters.
That issuance is part of a broader wave of corporate debt-raising by major tech firms — including Alphabet, Nvidia, Oracle, Salesforce and Meta — as combined spending by the largest technology companies on AI infrastructure is set to exceed US$730 billion this year, up from roughly US$700 billion previously. Analysts at Bridgewater Associates described the trend in February as marking a “more dangerous phase” of the AI boom, characterized by rising reliance on outside capital rather than cash reserves.
Rate Outlook Still Shapes Bond Positioning
The path of interest rates remains a central factor for bond investors on both sides of the border. Davis said BMO expects the Bank of Canada to hold rates through the remainder of 2026, with hikes more likely in 2027 depending on inflation. He noted the market has priced in one hike in Canada this year, but said BMO does not expect that to happen given economic uncertainty. In the U.S., Davis said BMO still anticipates a rate increase in December despite softer September job and wage growth figures, which reduced the probability of an October move by the Federal Reserve.
Together, the data points to a Canadian fixed-income landscape in flux — one where corporate credit, particularly from established banks, utilities and regulated sectors, is being framed by portfolio managers as a relative bright spot even as government bond flows swing sharply from month to month.
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.
This article references reporting from:
