Investments
Fixed income
Allocation
15.9%
Annual return
1.82%
Exposure
$1.55 B
Benchmark
1.55%
2025 performance
The bond portfolio returned 1.82% in 2025, compared to a benchmark return of 1.55%. The stronger performance was mainly due to holding a higher percentage of corporate bonds than the benchmark throughout the year.
Bond markets in both Canada and the US had positive returns, but the results differed due to diverging interest rates and trade policies.
Canadian fixed income delivered modest returns, with the FTSE Canada Universe Bond Index returning 2.64% for the year. These returns were primarily due to interest coupon payments and a small decline in short-term government bond yields. The Bank of Canada lowered interest rates four times (a total of 1%) due to slower economic growth and uncertainty around trade. However, longer-term interest rates rose, which reduced overall returns and caused Canadian bonds to underperform their US counterparts.
Despite record levels of corporate bond issues, demand for corporate credit remained high and credit spreads ended the year at the tightest levels since before the 2008 financial crisis.
Investment approach
We manage the bond portfolio with a focus on liquidity and safety. The portfolio positioning, with regards to sector weights, curve, and duration are determined by a top-down assessment of the economy and the credit cycle. We look for opportunities to improve returns by comparing value across different sectors.
To maintain liquidity in the corporate holdings, the portfolio is invested in the largest issuers in the market, which tend to be regulated utilities and other infrastructure related companies. The portfolio also holds a significant amount of shorter-term bonds from Canada’s five largest banks.
Capital allocation
The portfolio started the year with 37% allocated to corporate bonds and ended the year slightly lower at 36%. The benchmark weight for corporate bonds is 25%. While higher exposure to corporate bonds was maintained throughout the year, risk was reduced in other ways.
We increased the credit quality of our corporate bonds held, with the number of BBB-rated holdings decreasing from 6% to 3% by the end of the year.
In addition, we reduced our investments in provincial government bonds from 33% to 28% (compared to a benchmark of 40%).
Fixed income
You can't include multiple times the same chart.
Allocation
15.9%
Annual return
1.82%
Exposure
$1.55 B
Benchmark
1.55%
2025 performance
The bond portfolio returned 1.82% in 2025, compared to a benchmark return of 1.55%. The stronger performance was mainly due to holding a higher percentage of corporate bonds than the benchmark throughout the year.
Bond markets in both Canada and the US had positive returns, but the results differed due to diverging interest rates and trade policies.
Canadian fixed income delivered modest returns, with the FTSE Canada Universe Bond Index returning 2.64% for the year. These returns were primarily due to interest coupon payments and a small decline in short-term government bond yields. The Bank of Canada lowered interest rates four times (a total of 1%) due to slower economic growth and uncertainty around trade. However, longer-term interest rates rose, which reduced overall returns and caused Canadian bonds to underperform their US counterparts.
Despite record levels of corporate bond issues, demand for corporate credit remained high and credit spreads ended the year at the tightest levels since before the 2008 financial crisis.
Investment approach
We manage the bond portfolio with a focus on liquidity and safety. The portfolio positioning, with regards to sector weights, curve, and duration are determined by a top-down assessment of the economy and the credit cycle. We look for opportunities to improve returns by comparing value across different sectors.
To maintain liquidity in the corporate holdings, the portfolio is invested in the largest issuers in the market, which tend to be regulated utilities and other infrastructure related companies. The portfolio also holds a significant amount of shorter-term bonds from Canada’s five largest banks.
Capital allocation
The portfolio started the year with 37% allocated to corporate bonds and ended the year slightly lower at 36%. The benchmark weight for corporate bonds is 25%. While higher exposure to corporate bonds was maintained throughout the year, risk was reduced in other ways.
We increased the credit quality of our corporate bonds held, with the number of BBB-rated holdings decreasing from 6% to 3% by the end of the year.
In addition, we reduced our investments in provincial government bonds from 33% to 28% (compared to a benchmark of 40%).