Q1 2026 Fund Commentary

Commentary and opinions are provided by Mackenzie Investments.

Market commentary

Canada’s economy navigated a challenging first quarter as trade uncertainty continued to weigh on business confidence and manufacturing activity. Employment fell in January and February before stabilizing in March, when the economy added 14,000 jobs and the unemployment rate held steady at 6.7%.

The Bank of Canada held its policy rate at 2.25% at both its January and March meetings. Canada’s inflation rate eased to 1.8% in February, the softest reading in several months. The Bank noted that near-term growth was likely to be weaker than anticipated and that the energy price shock following the outbreak of the conflict in the Middle East posed upside risks to inflation in the near term.

The Canadian fixed income market delivered mixed results in the first quarter as geopolitical uncertainty and rising oil prices complicated the investment landscape. The yield on the 10-year Government of Canada bond rose from 3.43% at the start of the quarter to 3.47% by quarter-end, reaching a high of 3.58%, putting downward pressure on government bond prices, particularly late in the quarter. Corporate bonds showed resiliency, but underperformed government bonds with credit spreads widening slightly. High-yield bonds were relatively volatile as the late-quarter decline in risk appetite weighed on lower-rated issuers, though energy-linked names broadly outperformed.

Performance

The Fund’s federal bond exposure contributed to performance during the quarter. Canada Housing Trust No. 1 (1.9%, 2026/09/15) contributed to performance. Backed by insured residential mortgage assets and typically viewed as a defensive instrument, short-term federal agency bonds performed well during the period.

Portfolio activity

The sub-advisor added Province of Ontario (3.9%, 2036/06/02) during the quarter. The addition reflects a switch within the Fund’s Ontario exposure, extending modestly along the curve to capture higher yield while maintaining provincial bond exposure.

Province of Ontario (3.6%, 2035/06/02) was sold as part of active management within the provincial allocation. The sub-advisor redeployed proceeds into other provincial opportunities offering more attractive yield.

Canada Housing Trust No. 1 (1.9%, 2026/09/15) was reduced because of portfolio flow management, reallocating proceeds to meet liquidity needs. The bond remains a high-quality federal agency instrument backed by government-guaranteed residential mortgage assets.