Portfolio returns: Q3 2025
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. (Jan 30, 2023) |
IG Graduation Portfolio F | 0.83
| 1.42
| 3.71
| 4.67
| 5.31
| |||
Quartile rankings | 1 | 1 | 1 | 1 |
IG Graduation Portfolio Series F
Q3 commentary 2025
Highlights
① The portfolio posted a positive return over the quarter, as the Canadian yield curve steepened.
② Corporate bond exposure had the greatest impact on the portfolio’s performance during the period.
③ Short-term bonds posted a positive performance.
Portfolio Overview
The third quarter of 2025 unfolded against a backdrop of evolving macroeconomic conditions, shifting policy expectations and recalibrated investor sentiment. While the period began with a relatively constructive tone in risk markets, the narrative shifted as downward revisions to labour market data, central bank actions and geopolitical developments introduced new layers of uncertainty.
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 easing 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 the two-year yield falling by 12 basis points (0.12 of a percentage point), the five-year down eight basis points and the 10-year 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. Credit markets in Canada remained well bid, as investment grade spreads tightened further.
The FTSE Canada Short Term Bond Index achieved positive returns for the quarter.
The portfolio’s allocation to investment-grade corporate bonds positively impacted its performance. Specifically, holdings in corporate bonds within the financials and energy sectors contributed to the gains during this period.
The fund ended the period with an overweight allocation to corporate bonds at 65.9% and an underweight allocation to government bonds at 32.7%. During the period, the fund decreased its allocation to the industrials sector and increased its allocation to the infrastructure and real estate sectors.
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 been approaching the automotive and shipping/logistics sectors with caution, as we believe the impact of evolving trade dynamics is likely to be more pronounced.
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Commissions, fees and expenses may be associated with mutual fund investments. Read the prospectus and speak to an IG Advisor before investing. The rate of return is the historical annual compounded total return as of September 30, 2025, including changes in value and reinvestment of all dividends or distributions. It does not take into account sales, redemption, distribution, optional charges or income taxes payable by any securityholder that would have reduced returns. Mutual funds are not guaranteed, values change frequently and past performance may not be repeated. Mutual funds and investment products and services are offered through the Mutual Fund Division of IG Wealth Management Inc. (in Quebec, a firm in financial planning). And additional investment products and brokerage services are offered through the Investment Dealer, IG Wealth Management Inc. (in Quebec, a firm in financial planning), a member of the Canadian Investor Protection Fund.
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