“Canadian IG yields have gone from being some of the highest in the G7 in 2021–22 to near the lowest in 2025,” the report observes. The BoC’s 25-basis-point reduction in September helped extend that rally, with duration now shorter and sensitivity to government yields reduced.
Credit spreads have narrowed by roughly 100 to 120 basis points since 2023 as corporate leverage has stayed contained and government borrowing surged. The report attributes much of the recent strength to prudent balance sheet management, particularly among BBB-rated issuers, which “have generally outperformed during the strong credit rally in 2023–25.”
Energy and infrastructure dominate the Canadian investment-grade universe, together accounting for more than 60% of issuance. Meanwhile, high yield markets remain heavily tilted toward energy at about 45% of the index, offering a distinct profile from US high yield exposure, where energy represents only 11%.
Canadian high yield has benefitted from the BoC’s easing bias, delivering another quarter of outperformance despite global trade frictions. The report highlights that “investors get higher protection in Canadian HY, than US, since the proportion of yield that is risk-free is lower in Canada, after the fall in Canadian govt yields versus the US.”
While long-term curves have steepened since midyear, spreads for provinces and municipalities have tightened. Even Alberta’s bonds, which briefly widened on political concerns earlier in 2025, have since stabilized.
