FICC Market Review: Bond Market

The easy answer is “every day”, but given the market dynamics experienced during the first half of 2025 and the outlook for the remainder, the answer really is … “it depends”.

From one side, you can look at the demand dynamics in the market, anchored by institutional investors. On both sides of the border this year, investors have shrugged off the macro economic headlines and concerns (of which there have been many) and there has yet to be a prolonged risk-off tone. This resilience in the market has been fueled by investors having money to invest, resulting in demand being greater than supply and investors remaining willing buyers even during times of volatility and uncertainty.

Looking ahead, the question is, “will this investor appetite to buy diminish for the remainder of the year?” The issuance pipeline, in both Canada and the United States, appears to be steady but not enough to significantly shift the supply/demand imbalance. This pipeline is made up of refinancing needs from existing maturities with the wildcard of M&A that can be impactful enough to surpass issuance expectations.

The other side comes from the use of proceeds from the borrowers. 2024 was a story of refinancing and prefunding, given the overlapping market backdrop and cost of funding. In 2025, due in part to the increase in underlying rates, issuers have been less inclined to repay debt early or replace bank debt with longer term bonds because of the comparative cost. Specifically in the High Yield space in Canada, where the comparison of fixed rate debt with bank debt was very popular in 2024, has been more of a challenging argument based on the movements in floating rate (bank base rate) vs. fixed rate (bond base rate).

For the remainder of the year corporate borrowers will be left looking at their upcoming funding needs, risk tolerance, and funding costs. The reality is, if a borrower needs funding in the short-term, it is a great time to do a bond deal and waiting months is not likely to get you a better outcome … just look at where Investment Grade spreads and High Yield pricing has dropped to in recent months.

BUT if an issuer is thinking longer term and into 2026, the argument to fund early and incur prepayment penalties (many pieces of debt require an additional payment to repay early) or have a negative carry (interest on proceeds that are not immediately being used) becomes very situational and borrower-specific.

So, when is it a good time to do a bond deal? The markets are open, they are expected to remain open, and each borrower will need to assess based on their needs IF they should do a bond deal … but yes, it is a good time to do a bond deal now.

This article was originally published in The Twenty-Four.