Weekly Market Update - November 2, 2026

Last week, bond markets reacted to key central bank interest rate decisions—including a widely anticipated rate hike from the Bank of Canada (BoC) and a rate hold by the US Federal Reserve (Fed). Alongside these monetary policy decisions, market attention was captured by two landmark private AI infrastructure financing deals from SpaceX and Broadcom. 

In Canada, the BoC raised its key interest rate by 25 basis points to 2.5%—marking its first increase in more than three years. In response to the anticipated rate hike, short-term Canadian government bond yields, such as the two-year, rose approximately four basis points on decision day before pulling back to close near 3.30% as markets digested weaker-than-expected GDP data. The Governing Council acted primarily to reduce the risk of elevated energy prices spreading broadly to other goods and services. The Bank also raised its headline 2027 inflation projection from 2% to an average of 3%, expecting it to return to the 2% target by mid-2028.

In contrast, the US Fed held rates within the 3.75%- 4% range, as expected. The Federal Open Market Committee (FOMC) voted 10–2 to maintain rates, with two members dissenting in favour of a hike. Investors paid close attention to commentary from Fed Chair Kevin Warsh, looking for future rate path guidance. Warsh offered no explicit signal or direct forward guidance, re-iterating that inflation remained elevated and that the Fed requires more information to determine a future stance. In response, swap markets priced in a roughly 73% chance for a Fed rate hike in December. 

Major AI infrastructure deals are increasingly being structured through special purpose vehicles (SPVs) to keep debt off corporate balance sheets while aiming to preserve investment-grade credit ratings. SpaceX entered into a US$40 billion SPV equipment financing lease with Apollo to fund Nvidia GPU purchases, while Broadcom entered in a separate US$63 billion SPV arranged and financed by a group of Wall Street banks to fund the purchase of AI chips for lease to Anthropic. According to Bloomberg, Broadcom backstopped/guaranteed up to US$43 billion in residual value risk. As private credit and public bond markets absorb massive new AI debt, investors are tracking risk premiums, overall market capacity, and the circular financing risks inherent in these SPV deals. 

In October 2026, the S&P 500 index closed roughly 0.9% lower amidst a risk-off rotation away from technology and AI-linked equities as rising bond yields and persistent inflation weighed on growth valuations. Instead, capital shifted toward defensive sectors like consumer staples, utilities, and health care, while energy led S&P 500 sector gains—balancing out losses in the communication services and technology sectors. 

The downturn in AI-focused tech and communication mega-caps were largely concentrated in semiconductor equipment, AI infrastructure, and storage names—pressuring memory chip and data storage funds like the Roundhill Memory ETF (DRAM). DRAM’s performance was also weighed down by China’s CXMT reporting a memory-cell architecture breakthrough to rival Samsung and SK Hynix, along with broader investor skepticism over whether AI-driven semiconductor demand can sustain current levels. Despite the semiconductor sell-off, some investors redirected capital into speculative leveraged funds, such as the Direxion Daily Semiconductor Bull 3X ETF (SOXL).

Passively managed S&P 500 funds captured top inflows, though flows between specific funds diverged significantly. Vanguard’s S&P 500 (VOO) and State Street S&P 500 Portfolio ETF  (SPYM) funds recorded leading inflows, while State Street SPDR S&P 500 ETF (SPY) experienced net outflows, with almost all those outflows coming in the final week of October. This divergence underscored differing usage patterns between retail and institutional investors: SPY outflows are largely driven by speculative positioning and hedging activity given its deep options market—whereas SPYM tends to attract long-term buy-and-hold capital due to its lower expense ratio. 

Outside the S&P 500, US investors redirected capital into tax-exempt municipal (muni) bond ETFs, such as the iShares National Muni Bond ETF (MUB). This shift may have been driven by tax-loss harvesting following a historically weak September for municipal bond returns, as well as rising yields that made muni bonds increasingly attractive to high-income investors.