Fixed Income Heat Map: A Mid-Year Temperature Check for Canadian Bonds
Canadian bonds gained ground during the first half of 2026, but leadership has shifted. See how duration, credit and yield have shaped the fixed income landscape this year.
Canadian fixed income markets performed well in June rising 0.5%, with performance led by intermediate and longer-duration segments.1 Government bonds also outperformed credit.
Canada bond yields came in as geopolitical risk tensions eased and inflation concerns came down along with declines in oil prices.
Government bonds outperformed credit overall, with intermediate and long-term government bonds emerging as the strongest performers in the month.2
BMO Canadian Fixed Income ETF Reference Guide
Ticker |
Full ETF name |
Ticker |
Full ETF name |
Canadian Fixed Income Market, Duration and Credit Total Returns (MTD, %)
FCMTB = FTSE Canada Mid Term Bond Index. FCLTB = FTSE Canada Long Term Bond Index. A heatmap chart is a visual tool that shades cell backgrounds with color gradients based on the values inside a range. They help readers see high, low, and middle numbers at a quick glance. Dark Red cells represent the lowest number(s) and dark green represents the highest number(s). Yellow/Orange shaded cells represent number(s) in the middle of the range.
For the second quarter, Canadian fixed income generated strong positive returns as bond prices benefited from a relatively stable interest-rate environment and easing inflation concerns, with government and investment-grade corporate bonds both contributing positively.
Q2 yields initially rose, then gradually declined, with the front end of the yield curve anchored by the Bank of Canada (BoC) pause and most of the action occurring in the belly and long end of the curve. Two-year yields moved above 3% in mid-May before ending at 2.74%, while the 10-year yield reached 3.70% before finishing at 3.38%, supporting strong Q2 returns from intermediate and long-duration bonds.
Canadian Fixed Income Market, Duration and Credit Total Returns (QTD, %)
Year to date (YTD), Canadian fixed income returned +2.2% in the first half, with performance led by long duration maturities.
Canadian yields rose across the curve, with the sharpest pressure in the 1- to 5-year area as geopolitical risk and energy-related inflation concerns pushed rates higher earlier in the year. However, the later Q2 decline in intermediate and long yields helped longer-duration bonds recover, leaving long and mid-term exposures ahead of short-term bonds by June 30.
Geopolitical risk was a major driver of fixed income volatility in 2026, with the Iran conflict and related oil supply shock contributing to higher energy prices, renewed inflation pressure, and tighter financial conditions through higher bond yields.
Canadian Fixed Income Market, Duration and Credit Total Returns (YTD, %)
Over the past 12 months, Canadian fixed income returned +3.4%, with performance led by intermediate term and corporate bonds.
Credit outperformed government bonds overall, with mid-term credit the strongest performer for the period.
Over the one-year period, the Canadian yield curve experienced an upward shift that weighed most heavily on long-duration federal bonds. Shorter-term bonds and intermediate credit held up better, with mid-term corporate credit the strongest-performing sector. Long federal bonds materially lagged as duration sensitivity overwhelmed the benefit from higher yields.
Canadian Fixed Income Market, Duration and Credit Total Returns (1-Yr, %)
FCMTB = FTSE Canada Mid Term Bond Index. FCLTB = FTSE Canada Long Term Bond Index. Past performance is not indicative of future results.
Here is a look at BMO Fixed Income ETFs by Duration and yield to maturity (YTM). Provided for illustrative purposes, these BMO ETFs demonstrate exposure across various fixed income segments. Blue shaded area = short duration (1 to 5 years). Green shaded area = intermediate duration (5 to 10 years). Orange shaded area = Long duration (10-years+).
Yield to maturity is not a measure of future performance and is based on market conditions as of June 30, 2026.
Canadian Fixed Income ETFs: Yield to Maturity vs. Duration
U.S. Fixed Income ETFs: Yield to Maturity vs. Duration
The first half of 2026 is a useful reminder that fixed income is not a static trade. Duration provided the strongest lift as intermediate- and long-term yields declined late in the second quarter, while credit — particularly mid-term corporate bonds — proved more resilient over the full 12-month period.
Performance
Fund name |
Ticker |
Year-To-Date |
1-Month |
3-Month |
6-Month |
1-Year |
3-Year |
5-Year |
10-Year |
Since Inception |
Inception Date |
2.20% |
0.49% |
2.00% |
2.20% |
3.37% |
4.34% |
0.71% |
1.61% |
2.88% |
2010-01-19 |
||
1.67% |
0.36% |
1.48% |
1.67% |
3.88% |
6.14% |
2.97% |
2.81% |
3.02% |
2009-10-20 |
||
-0.38% |
-0.03% |
0.66% |
-0.38% |
2.45% |
4.45% |
-0.13% |
1.78% |
2.43% |
2013-03-20 |
||
1.29% |
0.23% |
0.72% |
1.29% |
2.76% |
4.18% |
3.23% |
2.48% |
2.22% |
2011-01-28 |
||
2.12% |
0.37% |
2.07% |
2.12% |
4.16% |
6.04% |
2.14% |
— |
2.99% |
2018-03-02 |
||
5.11% |
3.06% |
4.39% |
5.11% |
9.98% |
10.80% |
6.34% |
— |
5.60% |
2017-10-04 |
||
2.50% |
0.57% |
2.29% |
2.50% |
5.17% |
7.10% |
2.47% |
3.04% |
4.21% |
2010-01-19 |
||
3.03% |
0.72% |
2.74% |
3.03% |
0.08% |
-0.55% |
-4.21% |
-1.49% |
1.96% |
2010-05-19 |
||
2.20% |
0.53% |
1.98% |
2.20% |
2.98% |
3.63% |
0.11% |
— |
1.62% |
2018-03-02 |
||
1.20% |
0.34% |
0.98% |
1.20% |
2.43% |
4.07% |
1.57% |
1.36% |
1.70% |
2009-10-20 |
||
2.34% |
0.72% |
2.02% |
2.34% |
4.25% |
5.25% |
1.37% |
1.85% |
2.61% |
2013-03-19 |
||
1.98% |
0.73% |
1.62% |
1.98% |
3.06% |
3.86% |
0.19% |
0.69% |
2.47% |
2009-05-29 |
||
1.27% |
0.36% |
1.06% |
1.27% |
2.64% |
4.47% |
1.77% |
1.71% |
2.12% |
2009-10-20 |
||
3.48% |
0.46% |
3.74% |
3.48% |
3.34% |
2.14% |
-2.24% |
0.48% |
2.07% |
2013-03-19 |
||
2.94% |
0.22% |
3.31% |
2.94% |
4.31% |
5.24% |
0.63% |
2.46% |
4.80% |
2010-01-19 |
||
2.42% |
0.34% |
3.70% |
2.42% |
6.19% |
9.39% |
6.95% |
5.77% |
5.37% |
2014-02-10 |
||
1.41% |
0.36% |
1.18% |
1.41% |
3.05% |
4.93% |
2.15% |
— |
2.39% |
2018-03-02 |
||
2.10% |
0.39% |
1.53% |
2.10% |
5.20% |
8.35% |
— |
— |
4.20% |
2022-02-07 |
||
4.81% |
0.80% |
3.66% |
4.81% |
4.03% |
3.35% |
-0.21% |
1.08% |
2.73% |
2010-05-19 |
||
3.64% |
2.92% |
2.13% |
3.64% |
6.73% |
6.46% |
4.01% |
— |
2.46% |
2017-02-21 |
||
4.23% |
4.12% |
2.91% |
4.23% |
6.83% |
0.63% |
-4.18% |
— |
-0.08% |
2017-02-21 |
||
1.83% |
0.29% |
1.01% |
1.83% |
4.13% |
4.93% |
3.56% |
— |
2.82% |
2019-02-12 |
||
5.64% |
3.28% |
3.47% |
5.64% |
9.33% |
— |
— |
— |
7.36% |
2025-04-30 |
||
5.07% |
2.53% |
2.67% |
5.07% |
7.85% |
7.50% |
6.02% |
— |
5.59% |
2021-01-20 |
||
0.80% |
0.25% |
0.78% |
0.80% |
3.88% |
4.04% |
— |
— |
3.30% |
2023-01-23 |
||
-0.13% |
0.18% |
0.04% |
-0.13% |
2.40% |
3.41% |
-0.51% |
— |
1.28% |
2017-02-21 |
Source: Bloomberg, as of June 30, 2026. Performance is shown net of fees, in the currency of the respective share class with dividends reinvested. Past performance is not indicative of future results.
1 FTSE Canada Universe Bond Index.
2 FTSE Canada Mid Term Bond Index, FTSE Canada Long Term Bond Index, as of June 30, 2026.
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