Q2 2026 Fund Commentary

Commentary and opinions are provided by Mackenzie Investments.

Market commentary

Canada’s economy stayed under pressure in the second quarter as trade uncertainty continued to weigh on business confidence, though the labour market showed signs of stabilizing. Employment picked up in May, and the unemployment rate eased to 6.6%. Inflation accelerated, with the annual pace rising to 3.2% in May from 2.8% in April, as higher gasoline prices linked to the conflict in the Middle East pushed up energy costs. Core inflation measures held closer to 2%.

The Bank of Canada held its policy interest rate steady at 2.25% at both its April and June meetings as inflation picked up to 3.2% in May, driven largely by higher gasoline prices. Core inflation measures held closer to 2%.

Canadian corporate bonds were broadly stable in the second quarter. Energy-sector issuers benefited from elevated crude oil prices early in the quarter, which improved operating conditions. Investment-grade corporate bonds outside the energy sector held firm, supported by easing government bond yields late in the quarter as inflation concerns moderated. High-yield bond prices were choppy but finished higher, with energy-linked names outperforming.

Performance

Security selection among corporate bonds in the energy and financials sectors contributed to performance. Greater Toronto Airports Authority (2.75%, 2039/10/17) contributed to the Fund’s performance. It benefited from improving passenger volumes, revenue and cash flow. Its longer duration (interest rate sensitivity) was beneficial when Canadian yields fell.

Exposure to infrastructure bonds detracted. Sobeys Inc. (3.1%, 2028/10/30) detracted from performance because of its shorter maturity.

Portfolio activity

ARC Resources Ltd. (3.465%, 2031/03/10) was added for its Montney assets, cash generation and manageable debt. Shell PLC’s proposed acquisition of it improved future creditor support. Metro Inc. (3.469%, 2031/02/25) was Increased to add defensive income from a stable grocery and pharmacy operator. The company reported sales growth, stronger operating earnings and cost management.

Enbridge Inc. (5.375%, 2077/09/27) was sold after its valuation became less compelling, and to reduce exposure to its long legal maturity, issuer call discretion and potential extension risk. Pembina Pipeline Corp. (4.8%, 2081/01/25) was reduced to manage concentration risk. Pembina remains investment grade with stable infrastructure cash flows, but the hybrid bond’s subordinated structure and uncertain call outcome warrant a smaller position as the reset approaches.