Economists note that active global asset management firms are increasing their allocations to Canadian public sector debt, which includes both federal and provincial bonds, as the U.S. Treasury market grapples with concerns over debt sustainability.

One analyst stated that investors appear to view Canadian public sector duration as a reliable, high-quality alternative to U.S. Treasuries, despite its significantly smaller market size.

It was further noted that the term premium embedded in longer-dated Canadian government bonds is among the lowest in developed world markets, while allocations to Canadian corporate bonds remain well below passive benchmark weights.