A worldwide bond sell-off has pushed borrowing costs to multi-decade highs from Washington to London to Tokyo, but Canada’s corporate debt market has emerged as an unlikely pocket of calm — attracting record foreign inflows, a wave of new issuance and fresh product launches from Canadian asset managers even as government bond yields climb.
The U.S. 30-year Treasury yield has risen to levels last seen in June 2007, hitting 5.24 per cent on the Friday referenced in Globe and Mail reporting, up 37 basis points since the start of the year. Canada’s 30-year government bond yield has climbed to nearly 18-year highs but stood lower, at 4.16 per cent, up 24 basis points over the same period. Britain’s 30-year Gilt yield reached a 28-year high of 5.77 per cent, while Japan’s 30-year yield rose 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.
Why Canadian Corporate Debt Is Outperforming
While government bonds have moved with global peers, Canadian corporate credit has fared even better. The S&P Canada Investment Grade Corporate Bond Index has edged up 0.7 per cent since the start of the year, and the Canada High Yield Corporate Bond Index has gained nearly 3.4 per cent, according to figures cited by the Globe and Mail. Derek Brown, managing director and head of fixed income at Beutel, Goodman & Co., said long-end buyers such as insurers and pension plans searching for higher yields have cushioned the sell-off at the longer end of the corporate credit curve. Corporate credit spreads — the premium companies pay over benchmark government yields to borrow — have not widened as much as might be expected given higher oil prices and rate-hike expectations, he said.
Part of the explanation lies in fiscal comparisons. Brown noted the U.S. has averaged federal deficits of roughly 6 per cent of GDP in recent years, while Canada’s combined federal and provincial deficit sits around 3.5 per cent of GDP under the federal government’s “Canada Strong” budget. He characterized U.S. stimulus, with its tax cuts and immediate expensing benefiting AI hyperscalers, as a “sugar rush,” compared with Canada’s focus on infrastructure, ports, pipelines and rail — a slower-burning form of stimulus.
An Issuance Boom Without the AI Debt Wave
Canada’s corporate bond market has also avoided the flood of debt tied to artificial-intelligence infrastructure that has weighed on U.S. yields. Reuters reported, citing BNP Paribas data as of Aug. 10, that AI hyperscalers issued US$220-billion in debt in 2026, compared with US$12.5-billion a year earlier. Canada’s corporate issuer base looks different, dominated by financials, energy companies and pension funds. “It’s basically very high quality, very positive free-cash-flow-generating companies,” said Avi Hooper, a senior adviser to London-based research firm ABP Invest Ltd.
Still, issuance itself has 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 in “high-yield-like” corporate debt instruments issued over the past 18 months.
Foreign Buyers and New Fund Launches
Demand for Canadian debt more broadly has been extraordinary. National Bank of Canada strategists Taylor Schleich and Warren Lovely reported that non-residents bought a net $35-billion of Canadian bonds in June alone — nearly triple the prior record of $13-billion set in June 2024 — bringing year-to-date foreign net buying to $185-billion, more than 50 per cent above the next-largest year, 2020. Foreign investors now own 45 per cent of the domestic Government of Canada bond market, edging out the 42.9 per cent held by Canadian residents, with buyers concentrated in the United States, United Kingdom, eurozone and Japan. While most of that foreign appetite has targeted government bonds, corporate debt has drawn interest too, and the strategists noted foreigners now hold more than $2.5-trillion of Canadian bonds overall, more than double what they held a decade ago. They cautioned that a foreign-heavy investor base carries risks, and that “maintaining” Canada’s political stability and fiscal credibility “will be key to keeping borrowing costs relatively low.”
The favourable backdrop for Canadian corporate credit has coincided with new product activity from domestic managers. Beutel Goodman launched a Long Term Corporate Bond Strategy in September, aimed at institutional investors seeking dedicated long-duration corporate exposure; the firm said the strategy had already attracted more than $200-million in institutional inflows. “The Canadian corporate bond market has evolved significantly over the past two decades and offers investors a broader opportunity set than ever before,” Brown said in announcing the launch. Beutel Goodman’s fixed-income team manages more than $12-billion across government, provincial, securitized, investment-grade corporate and high-yield mandates.
Central Bank Watching for Signs of Strain
Bank of Canada officials have acknowledged “spillover” from higher global yields but have downplayed fears of instability. Governor Tiff Macklem said the AI infrastructure buildout is stoking demand for new corporate bond issuance globally, which lowers prices — and raises yields — for previously issued bonds. Senior deputy governor Carolyn Rogers told reporters it was important to “distinguish between volatility and dysfunction,” adding that the vulnerability the central bank worries about arises when leveraged investors unwind positions quickly and liquidity dries up. “We don’t see that happening right now,” she said. Market participants including Brown suggested the higher-rate environment itself may be the new normal rather than an aberration: “We have exited the post-great-financial-crisis paradigm of ultra-low interest rates… We’re back to what the norm was. The exception was probably the last 10 to 15 years.”
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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