Canadian Provincial Bonds Underperform as Global Yield Selloff Weighs on Returns, BMO Says
MT newswire2026/10/07 15:2911:29 AM EDT, 10/07/2026 (MT Newswires) -- Canadian provincial bonds have weakened over the past month as rising global bond yields hurt longer-term bonds, according to BMO Capital Markets in a note. The 30-year Government of Canada (GoC) bonds yield briefly topped 4.3%, its highest since 2008, as expectations grow that the Bank of Canada will follow the US Federal Reserve and raise rates, wrote BMO in a Tuesday note. Long provincial spreads widened slightly in September as risk appetite softened, said the bank. Even so, provincial bonds have outperformed GoCs by around two percentage points over the past six months and nearly three points over the past year. Total returns remained negative across the one-, three- and 12-month periods, however, as higher yields more than offset spread gains, added BMO. Spread performance was mixed across provinces in Canada, with most posting tighter spreads than a year ago, said the bank. Quebec was the main outlier as political uncertainty returned after the Parti Quebecois won 59 seats on Monday, short of a majority in the provincial assembly.
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