May 07, 2025

Fixed Income Insights (Canada) - May 2025

Monthly report

Canadian bonds adjust to perceived tariff impact

The heavy sell-off after US tariffs were announced and subsequent relief rally from the 90-day pause left global financial markets bruised in April, with big currency moves, notably a weaker USD, impacting investor returns. The Uncertainty Index surged on heightened risk aversion, while investors sheltered in gold and shorter conventionals. Credits held up well. 

Key highlights:

  • Macro and policy backdrop – IMF reduces growth projections 
  • Canadian governments – Further steepening in the Canadian curve
  • Canadian credit – Credits were broadly stable, as tariff fears waxed and waned
  • Global yields and spreads – Market focused on negative growth impact of tariffs
  • Sovereign and climate bonds – Green bonds’ USD underweight a key theme
  • Performance – US dollar weakness, and Euro and yen strength dominate returns

This report provides actionable insights on currency-adjusted performance, macro drivers, shifts in yields, spreads and curves across conventional, inflation-linked and corporate bonds within the Canadian fixed income market.

For specialist content on a range of investment topics, including macroeconomic analysis and how it affects market performance and multi-asset analysis, viewed through our indices and data, explore our Global Investment Research hub.

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