Q2 2026 Fund Commentary

Commentary and opinions are provided by Mackenzie Investments.

Market commentary

North American economies followed different paths in the second quarter. Canada’s economy stayed under pressure from trade uncertainty, while the U.S. economy expanded at a solid pace. Inflation picked up in both countries because of higher energy costs tied to the conflict in the Middle East, though oil prices retreated late in the quarter as tensions eased.

Monetary policy stayed on hold in both countries. The Bank of Canada held its policy interest rate steady at 2.25% at its April and June meetings, while the U.S. Federal Reserve Board held the federal funds rate steady at a target range of 3.50%–3.75% and signaled that rate increases were possible later in the year.

Multi-sector fixed income delivered mixed results. U.S. government bond yields rose as the market priced in the possibility of Fed rate increases, putting downward pressure on prices, while Canadian bond yields eased late in the quarter on contained inflation. Investment-grade corporate bonds were broadly stable, and energy-sector issuers held up well. High-yield bonds were choppy but finished higher as the interest-rate outlook shifted.

Performance

Overweight exposure to duration (sensitivity to interest rate changes) contributed to performance.

U.S. duration contributed the Fund’s performance. Lower growth expectations and demand for “safe haven” investments supported treasury prices, while coupon income raised returns.

The Fund’s hedged credit risk, using derivatives positioning, detracted from performance. Norwegian bond exposure detracted from performance as inflation and government bond supply kept yields under upward pressure and weakened currency against Canadian dollar.

Portfolio activity

U.S. treasury (1.125%, 2030/10/15) was added to the Fund to add high-quality, liquid duration based on its defensive characteristics and potential price appreciation. Diamondback Energy Inc. (3.125%, 2031/03/24) was increased based on the company’s Permian asset base, free cash flow generation and ongoing debt reduction.

Government of Australia (1%, 2030/12/21) was sold because of domestic inflation and uncertainty around the timing of monetary easing. Government of Canada (3.25%, 2035/06/01) was reduced manage interest rate sensitivity and realize gains. Its longer maturity led to greater price vulnerability to higher global yields, inflation uncertainty and increased government borrowing.