Portfolio returns: Q3 2025
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. July 16, 2014 |
IG Core Portfolio – Global Income F | 0.98
| 1.39
| 2.89
| 2.16
| 4.68
| 1.38
| 2.39
| 2.80
|
Quartile rankings | 3 | 4 | 4 | 4 | 4 | 3 | 4 |
IG Core Portfolio – Global Income Series F
Q3 commentary 2025
Highlights
① The portfolio rose over the quarter, as global bonds delivered a positive performance.
② Global bond exposure contributed most to portfolio performance.
③ A decorrelation of rates across the G10 countries characterized the period.
Portfolio Overview
The third quarter of 2025 began with a relatively constructive tone in risk markets, but the narrative shifted as downward revisions to labour market data, central bank actions and geopolitical developments introduced new layers of uncertainty.
The most notable development in the U.S. was the U.S. Federal Reserve’s decision to cut the federal funds rate by 25 basis points (a quarter of a percentage point) at its September meeting, bringing the target range to 4%–4.25%. This marked the first rate cut since December 2024 and came amid growing evidence of labour market softening. The July employment report revealed historic downward revisions to prior payroll data; May and June job gains were revised down by a combined 258,000, significantly altering the near-term assessment of labour market strength. Market pricing now reflects expectations for an additional 50 basis-point (half a percentage point) cut by year-end, with additional cuts in 2026.
U.S. Treasury yields were mixed over the quarter. The two-year yield fell by 11 basis points (0.11 of a percentage point), while the 10-year and 30-year yields declined by eight and four basis points (0.08 and 0.04 of a percentage point) respectively. The curve remains steep relative to earlier in the year, reflecting both easing expectations and a reassessment of long-term inflation risks. The U.S. CDX IG index (which monitors the credit risk of large North American companies) ended the quarter at 52 basis points, down modestly from 54 basis points at the start, with spreads remaining resilient despite macro volatility.
The Bank of Canada cut interest rates in September, which was largely expected by market participants. With the domestic economy showing signs of softness, the case for additional rate cuts continues to build. Unemployment in Canada continued to move higher, hitting its highest level in four years at 7.1%. Canadian yields declined across the curve, with two-year yields falling by 12 basis points, five-year yields down eight basis points and 10-year yields lower by nine basis points. The 30-year yield, however, rose by seven basis points, reflecting concerns around long-term fiscal sustainability. The spread between Canadian and U.S. 10-year yields remained compressed, trading in a tight range around 95 basis points, down from the highs of 150 basis points earlier in the year.
The Mackenzie IG Global Bond Pool is the largest weighted allocation in the portfolio and the largest contributor to performance. Global bonds posted positive returns during the period, as the market shifted from a focus on upside inflation to concerns around growth.
The Mackenzie Core Plus Global Fixed Income ETF is the third-largest weighted allocation in the portfolio and a positive contributor to performance. The fund posted positive returns, as North American government bonds rallied and credit spreads became tighter.
Market overview: signs of optimism emerge, despite the noise during "Liberation Day" fallout
The third quarter delivered broad gains across asset classes, with market performance largely overriding a backdrop of cautious sentiment. Investors looked past persistent trade policy headlines, increasingly treating the U.S. administration's tariff policy as noise rather than a core risk. The primary catalysts for the positive performance were a subtle shift toward lower-interest-rate expectations and resilient corporate earnings.
Signals from the U.S. Federal Reserve of imminent rate cuts were followed by a quarter percentage cut in September. Government bond yields eased into the quarter's end, supporting bond prices, while corporate bonds outperformed government bonds.
Market outlook: A gradual policy-easing backdrop.
Looking ahead, we remain cautious. The market continues to price in a benign outcome: moderating inflation and gradual policy easing. However, we are mindful of fragilities, particularly around labour market visibility and the potential for policy missteps. In Canada, the convergence of yields with the U.S. remains a theme we are watching closely and positioned for.
Credit remains expensive relative to historical norms, but high all-in yields and positive fund flow continue to support tight spreads. In our view, valuations appear stretched, particularly in an environment where fundamentals have deteriorated. We are maintaining a disciplined approach to credit selection, focusing on higher-quality issuers and more defensive sectors, such as utilities and pipelines. These sectors offer more predictable cash flows and benefit from regulatory tailwinds. Finally, we have also been underweighting the automotive and shipping/logistics sectors, where we believe the impact of trade dynamics are likely to be more pronounced.
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