Government Bonds Dominate Canadian Bond Market

Canada's bond market is undergoing significant changes due to increasing government borrowing. The National Bank of Canada reports that Government of Canada bonds have become a dominant force in the market, making up 45% of index-eligible bonds.

This shift has implications for other issuers, such as provinces and corporations, which may face reduced demand and need to offer higher yields to attract investors.

The recent rise in interest rates in July has exacerbated this issue, with provincial bonds falling 2.3% that month, cutting their year-to-date return to 0.4%.

Lovely notes that large corporate deals from tech firms could add further supply pressure to certain sectors.