Mackenzie Short Duration Fixed Income
Mandate commentary
Q2 2026
Highlights
① The mandate returned 0.92%, marginally underperforming the FTSE Canada Short Term Overall Bond Index by 0.03 percentage points since inception, as government positioning offset corporate credit contributions.
② Earnings strength helped markets absorb uncertainty.
③ Valuations and rates make selectivity more important.
Mandate overview
The U.S. economy continued to benefit from substantial investment in artificial intelligence infrastructure, including data centres, power generation and semiconductors. Employment growth slowed but did not develop into broad-based layoffs, keeping recession risks contained. Inflation remained persistent, and the U.S. Federal Reserve held interest rates steady. Its June communications and projections prompted markets to shift from anticipating rate cuts to considering renewed tightening.
Canada’s economy improved from a weak starting point but remained softer than the United States. April GDP increased 0.5%, employment recovered in May and unemployment declined to 6.6%. The Bank of Canada maintained its policy rate at 2.25%, balancing improved near-term activity against labour-market slack, mortgage-reset pressures, declining business investment and continued trade uncertainty.
Canadian government bond yields were volatile during the quarter, rising sharply in mid-May before declining by the end of June. Elevated energy prices initially placed upward pressure on yields, while an interim peace agreement with Iran eased energy-related inflation concerns. Softer-than-expected U.S. labour-market data also increased expectations for global monetary-policy easing and placed downward pressure on longer-term yields. The Canadian yield curve remained upward sloping at quarter-end.
Corporate credit exposure contributed positively to returns, supported by communication services, financials, industrials and infrastructure bonds. Government positioning detracted as the positive contribution from provincial bonds was more than offset by lower exposure to federal government bonds.
Mandate: Mackenzie Short Duration Fixed Income overview
Performance contributors
Corporate credit exposure was the primary positive contributor, supported by communication services, financials, industrials and infrastructure bonds. Attractive income and resilient issuer fundamentals helped these sectors deliver comparatively stronger performance.
Provincial government bond positioning also contributed positively to returns.
Performance detractors
Government bond positioning detracted as the positive contribution from provincial bonds was outweighed by the portfolio’s lower exposure to federal government bonds, which benefited as yields declined.
Selected energy bonds also underperformed, while cash holdings were a modest detractor during a broadly positive quarter for fixed income.
Total gross returns:
Total return (CAD) | QTD | YTD | 1YR | 3YR | 5YR | SINCE INC. (FEB. 18, 2025) |
MACKENZIE SHORT DURATION FIXED INCOME | 0.92
|
Mandate repositioning
At quarter-end, the mandate remains tilted toward corporate credit, which represents 55% of the portfolio compared with 31% of the benchmark. Government bond exposure remains lower at 44%, compared with 69% for the benchmark.
The mandate also maintains a modestly shorter duration of 2.53 years, compared with 2.78 years for the benchmark.
Market overview: earnings strength helped markets absorb uncertainty
The second quarter of 2026 reinforced the resilience of financial markets. Investors faced conflict in the Middle East, commodity-price volatility, shifting interest-rate expectations and renewed inflation concerns, yet global equities continued to advance as corporate earnings and economic activity remained stronger than expected. The S&P 500 gained 14.9% in U.S.-dollar terms for the quarter, while the S&P/TSX Composite Index advanced 6.4%, supported by healthier earnings expectations and improving market breadth.
Canadian equities were led by a strong rebound in financials, as better-than-expected bank earnings, resilient credit quality and improved capital markets activity lifted sentiment. U.S. equities were supported by earnings strength rather than a simple risk-on rally, with Information Technology leading as AI infrastructure spending continued to anchor sentiment. International equities also contributed meaningfully, with emerging markets Korea and Taiwan benefitting from demand across the global technology supply chain.
Market outlook: valuations and rates make selectivity more important
Markets enter the second half of 2026 with fundamentals remaining broadly supportive, although elevated equity valuations leave less room for error. Earnings growth is likely to remain the key driver of returns, while inflation trends, central bank policy and interest-rate expectations will continue to shape market sentiment.
Across asset classes, diversification remains important. Canadian, international and emerging market equities offer exposure to distinct sources of growth, while higher yields in fixed income continue to provide a cushion against volatility. Selectivity remains key as investors balance opportunities against valuation and policy risks.
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