Central banks' pivot to growth steadies yields and drives renewed demand for longer bonds
After a turbulent year for fixed income, North American bond markets are showing fresh signs of resilience as central banks ease off the brakes.
The latest FTSE Russell Fixed Income Insight Report for November 2025 notes that rate cuts from both the US Federal Reserve and the Bank of Canada are beginning to filter through markets, buoying long-dated government bonds and stabilizing credit spreads.
The report highlights that policymakers across the G7 have largely shifted away from their inflation fight toward supporting employment.
In the US, the Fed’s decision to end quantitative tightening on December 1 “leaves a risk money market rates spike unintentionally, as in 2019,” but also signals a greater concern for maintaining liquidity.
In Canada, the BoC’s policy rate now sits near the lower end of its neutral range at 2.5%, following aggressive cuts aimed at countering job losses and sluggish consumer demand.
Both investment-grade (IG) and high-yield (HY) credit in the US are faring well and the report notes that “both IG & HY credit show very low distress levels (7th & 12th percentiles),” highlighting investor confidence even as economic data remains patchy.
Asset-backed credits and bank debt have rebounded sharply from the regional banking stresses of 2023, while US HY bonds continue to offer appealing yields relative to their duration risk.
In Canada, spreads on provincial and municipal bonds tightened further after the BoC’s easing cycle, and infrastructure and energy credits led performance. Canadian HY energy issues, which make up nearly half the market, have outperformed despite softer oil prices.
Returns over the past month were led by longer-dated Bunds and gilts in global comparisons, while Canadian and US corporates continued to outperform government bonds.
The report concludes that easing financial conditions and firmer risk appetite have brought “some evidence lower rates are helping longs, as well as shorts,” suggesting the long end of the curve may remain a bright spot into year-end.
