Canadian Bond Trading Slows in July, But Foreign Influence Rises

Canada's bond trading market experienced a seasonal slowdown in July, but experts say this is a normal occurrence. According to National Bank of Canada, secondary trading volumes typically drop by around 15% from June to July, making it the biggest monthly decline since 2018.

The bank notes that while corporate bond trading cooled off after an unusually strong June, activity in other areas remained relatively healthy. In fact, interest skewed towards longer-dated issues in provincial, Crown, and municipal bonds.

What's more interesting is the increasing influence of non-Canadian residents on Canada's credit market. They took a record 26% of corporate bond turnover in July, indicating that foreign investors are playing a larger role in determining prices and spreads.

This shift could make Canadian corporate bond spreads more susceptible to global risk sentiment and currency exposure costs, making it essential for issuers to be mindful of these factors when planning new debt offerings.