Last week in bond markets, optimism surrounding a ceasefire extension between the US and Iran triggered a rally in Canadian and US bonds, pushing yields lower, as falling oil prices reduced energy inflation concerns. US Core Personal Consumption Expenditures (PCE) data came in aligned with estimates, but was still above the Federal Reserve’s (Fed) target inflation rate. In Canada, real gross domestic product (GDP) contracted for two consecutive quarters—placing Canada into a technical recession and pushing Canadian yields lower. The two-year Canadian government bond yield fell 0.14% to close the week off at 2.77%.

GDP is a measure of economic activity. The generally accepted definition of a technical recession is defined by two consecutive quarters of negative growth in real GDP. Canada’s real GDP for the first quarter of 2026 fell by 0.1% on an annualized basis, which followed a downwardly revised 1% contraction in the final quarter of 2025. According to Bloomberg, Canada edged into a technical recession on weak business and government spending, a surge in imports (particularly gold), and softer exports, which drove a slight contraction in the first quarter. This marks Canada’s first technical recession since the onset of the pandemic in 2020.

In the US, Core PCE is preferred by the Fed as it excludes the volatile prices of food and energy, which provides a clearer picture of longer-term inflation trends. The Fed seeks to achieve inflation at the rate of 2% percent over the long term. April’s annual Core PCE reading (excluding food and energy) rose 3.3%, which was aligned with estimates—but still above the Fed’s 2% inflation target. Additionally, the annual headline PCE (including food and energy) accelerated to 3.8% year-over-year—its highest reading since May 2023. It was driven mainly by surging gasoline prices amidst the war in Iran. Generally speaking, rising inflation can contribute to upward pressure on bond yields, as investors often demand compensation for the eroding purchasing power of fixed-income investments. 

In corporate bond news, Bell Canada announced bond offerings totaling C$1.6 billion and US$650 million. The C$1.6 billion Canadian offering was composed of two parts: C$900 million in 10-year bonds and C$700 million in 30-year bonds. The 30-year Canadian bond matures on June 3, 2056, offering a 5.3% coupon, rated Baa2 by third-party credit rating agency Moody’s. Proceeds from these combined Canadian and US offerings were intended to be used for repurchasing existing debt—including securities targeted by a concurrent tender offer, as well as general corporate purposes. A bond tender offer is a proposal made by a company to repurchase some or all of its outstanding bonds from current bond holders. Companies may consider such strategies to optimize debt profiles, manage interest costs and/or reduce near-term financing risk, among other objectives.