Ahead of the Curve: Monthly Bond Market Recap and Outlook – October 2025

Recap

• Canadian bond prices rose in October as yields across the curve moved lower. The broad fixed income market, represented by the FTSE Canada Universe Bond Index, delivered a return of +0.69% for October.
• In the U.S., the Federal Reserve cut the federal funds rate from 4.25% to 4.00%, citing elevated downside risks to employment as the primary driver. The government shutdown delayed official macroeconomic data releases; however, private indicators such as the ADP National Employment Report showed companies shed 32k jobs in September (vs. +51k expected and +54k prior, revised to -3k).
• Domestically, the Bank of Canada lowered its policy rate from 2.50% to 2.25% amid ongoing economic weakness and inflation expected to remain near the 2% target. While employment surprised to the upside (+60.4k vs. +5k expected and -65.5k prior), keeping the unemployment rate steady at 7.1%, broader conditions were softer (Monthly GDP: -0.3% (vs. +0.3% prior), S&P Global Canada Composite Purchasing Managers Index (PMI): 46.3 (vs. 48.4 prior).
• The net effect was a bullish steepening of the Canadian yield curve, with short-term yields falling more than mid- and long-term yields. The long end outperformed (FTSE Canada Long Term Overall Bond Index: +1.27%) versus midterm (FTSE Canada Mid Term Overall Bond Index; +0.57%) and short-term segments (FTSE Canada Short Term Overall Bond Index;+0.40%).
• Credit spreads on investment-grade corporate bonds (Bloomberg Canada Aggregate Corporate Bond Index) were largely unchanged month-over-month.

Source: Guardian Capital based on month over month (MoM) change data for the FTSE Canada Universe Bond Index from PC Bond, and data from Bloomberg for the Canada Sovereign Curve rates (ID: YCGT0007); as at October 31, 2025

The Look Ahead

• Economic growth is expected to remain soft and gradually recover over the medium-term.
• Overnight index swaps (OIS) pricing suggests that Bank of Canada is not expected to implement further rate cuts.

Positioning Opportunities

• For investors seeking to reduce the reinvestment risk associated with Guaranteed Investment Certificates (GICs) and high-interest savings accounts (HISAs) due to short-term yields moving lower, GuardBonds™, a suite of target maturity funds, provide attractive yields and offer the potential for greater tax efficiency because of the capital gains potential embedded in purchasing of discount bonds. Additionally, GuardBonds™ are able to provide daily liquidity to investors unlike non-redeemable GICs, which may penalize investors for early redemption.
• For the Guardian Strategic Income Fund, the Manager is targeting idiosyncratic bond issuers that are expected to have a lower market beta compared to larger issuers that may be more sensitive to high yield ETF fund flows.
• In the Guardian Investment Grade Corporate Bond Fund, the Manager has made some incremental switches in bond holdings further out on the term structure, where the credit spread curve looks attractive.
• The Manager is seeking to maximize return from yield curve roll-down* and mitigate credit spread exposure in the Guardian Canadian Bond Fund by allocating towards mid-term Federal Agency bonds.

*When the yield curve is upward sloping, bonds with longer maturities have higher yields than shorter-term bonds. As time passes, those longer maturity bonds “roll down” to a lower rate on the yield curve, resulting in capital appreciation.

Source: Guardian Capital, PC Bond, and Bloomberg as at October 31, 2025. Details of the Indexes used in the chart above can be found below.

Guardian Fixed Income Funds | Current Positioning

GuardBonds™ Investment Grade Bond Funds

• A suite of actively managed, defined maturity bond funds, that can be used to efficiently construct customized bond ladders.
• Mostly invested in Investment Grade bonds purchased at a discount, to take advantage of capital gains potential.²
• Excellent GICs alternative, more liquid¹ and tax efficient.²

Guardian Canadian Bond Fund

• Slightly longer duration relative to its benchmark, the FTSE Canada Universe Bond Index (7.48 as at September 30).
• Higher concentration in 5-, 7- and 10-year key rates and lower concentration in 20- and 30-year key rates relative to the benchmark.
• Overweight exposure in short-term corporate bonds, but a lower relative contribution to spread duration. Relative excess exposure to spread sensitivity is predominantly allocated to mid-and-long-term Provincial bonds.

Guardian Investment Grade Corporate Bond Fund

• Similar duration profile relative to its benchmark, the FTSE Canada Mid Term Corporate Bond Index (5.89 as at September 30).
• Higher concentration in 3-, 7-, and 10-year key rates and lower concentration in 5-year key rates, relative to the benchmark.
• Overweight bonds within the Real Estate and Energy sectors and underweight bonds within the Infrastructure and Industrial sectors.

Guardian Strategic Income Fund (Alternative Fund)*

• Maintained tactical US-Canada 10-year futures trade (i.e., long US 10-year, short Canada 10-year).
• Maintained tactical US yield curve steepener futures trade (i.e., long 2-year, short 10-year).
• Slightly decreased credit hedges following intra-month credit spread widening.
• Took profits in higher beta Financials, Energy, Telecommunication, and Industrials while adding to other Industrials, Media, Real Estate, Consumer Cyclical, and Healthcare issues that had widened during the month.

¹ Each GuardBonds™ fund, despite having a specified maturity date, is fully liquid (intra-day liquidity on the ETF versions, daily liquidity on the mutual fund versions). GICs – even those of the redeemable variety – do not offer the same option for liquidity should it be needed.

² Each GuardBonds™ fund prioritizes holding bonds trading at a discount with the intention of holding them until maturity. When a discount bond matures at par  value, the price appreciation is treated as a capital gain. Total return on a GuardBonds™ fund is expected to consist of bond interest income and capital gains. GICs, on the other hand, are always fully taxed as interest income.

Fund Details

Source: Guardian Capital based on data from PC Bond, Bloomberg as at October 31, 2025

Characteristics of Portfolio Holdings:  The Current Yield, Duration, Yield to Maturity, Coupon, Average Price and Average Quality shown are based on the weighted average of the securities held in the respective Funds’ portfolio, and for the comparative benchmarks they are based on the weighted average of the Index constituents. These characteristics are not the yield, distribution rate or performance return of any Fund and are not intended to represent the distribution or return experience of any unitholder, unless otherwise specified. It is only intended to give investors an idea a particular portfolio characteristic of the underlying securities held in the Fund’s portfolio.

Current Yield: The Current Yield is calculated as the weighted average coupon over the weighted average price of the bonds in the portfolio, as of the date specified and does not represent an actual one-year return. ^Note: For the Strategic Income Fund the yield value reported in the Current Yield column is its Distribution Yield. Distribution Yield is based on Series F distributions per unit over the trailing 12-month period, divided by the end of period unit price. This is a more appropriate measure of the rate of income an investor may expect from the Fund than Current Yield because the Fund may invest in non-coupon paying securities (i.e., futures, options, forwards, etc.) compared to traditional fixed income funds.

YTM: The Yield to Maturity (YTM) shown is the current yield-to-maturity, gross of fees, based on the current market price of the underlying portfolio holdings as at the date indicated. These yields will fluctuate regularly. YTM represents the expected annual rate of return earned on a bond under the assumption that the debt security is held until maturity. ^†Note: For the T-Bill Funds, the YTM value shown is Yield to Maturity at Cost or YTM (at Cost), which is the weighted average YTM (at Cost) of each of the underlying T-Bill securities in the portfolio, net of cash. YTM (at Cost) means the percentage rate of return paid if the T-Bill security is held to its maturity date from the original time of purchase. The calculation is based on the coupon rate, length of time to maturity, and original price of the underlying T-Bill securities. ^^Note: For the Strategic Income Fund the YTM value shown is Yield to Worst (YTW), given the Fund mostly holds high yield securities. YTW represents the expected annual rate of return earned on a bond under the assumption that the debt security is repaid in full ahead of schedule by the issuer. YTW is lower than YTM given the bond would be held over a shorter period, and is more commonly used for high yield securities like the majority of securities in the Guardian Strategic Income Fund’s portfolio.

*The Guardian Strategic Income Fund is an alternative mutual fund. It is permitted to invest in asset classes or use investment strategies that are not permitted for other types of mutual funds. The specific strategies that differentiate this Fund from other types of mutual funds include borrowing cash, engaging in short selling and investing in specified derivatives. While these strategies will be used in accordance with the Fund’s objectives and strategies, during certain market conditions they may accelerate the pace at which your investment changes in value. This Fund also pays the Manager a Performance Fee equal to 15% of the amount by which the Investment Performance of the applicable series of Units exceeds the aggregate of the High Water Mark and the cumulative Hurdle Amount during the Performance Period. Please refer to the Fund’s prospectus for additional details. Statistics only reflect bond segment.

For more information on the financial terms used in this document, please refer to the Glossary of Financial Terms on our website at: https://www.guardiancapital.com/investmentsolutions/glossary-of-terms/

**Fixed Income Risk-for-Yield Spectrum chart

91 Day T-Bill: FTSE Canada 91 Day T-Bill Index, which tracks Canadian Treasury Bills with maturities of 91 days.

Short: FTSE Canada Short Term Overall Bond Index, which tracks bonds with maturities of 1-5 years.

Mid: FTSE Canada Mid Term Overall Bond Index, which tracks bonds with maturities of 5-10 years.

Universe: FTSE Canada Universe Bond Index, which tracks the universe of corporate and government bonds within Canada.

Long: FTSE Canada Long Term Overall Bond Index, which tracks bonds with maturities over 10 years.

Corporate: FTSE Canada All Corporate Bond Index, tracks corporate bonds within Canada.

High Yield: FTSE Canada High Yield Bond Index:, which tracks high yield bonds within Canada.

DISCLAIMER

This commentary is for informational purposes only and does not constitute investment, financial, legal, accounting, tax advice or a recommendation to buy, sell or hold a security. It shall under no circumstances be considered an offer or solicitation to deal in any product or security mentioned herein. It is only intended for the audience to whom it has been distributed and may not be reproduced or redistributed without the consent of Guardian Capital LP. This information is not intended for distribution into any jurisdiction where such distribution is restricted by law or regulation.

Please read the prospectus, Fund Facts or ETF Facts before investing. Important information, including a summary of the risks, about each Fund is contained in its respective offering documents. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund and exchange traded fund (ETF) investments. You will usually pay brokerage fees to your dealer if you purchase or sell units of an ETF a stock exchange. If the units are purchased or sold a stock exchange , investors may pay more than the current net asset value when buying units of the ETF and may receive less than the current net asset value when selling them. For ETF Units and mutual funds other than money market funds, unit values change frequently. For money market mutual fund Units, there can be no assurances that these mutual fund Units will be able to maintain their net asset value per unit at a constant amount or that the full amount of your investment in the fund will be returned to you. Mutual fund and ETF securities, including money market funds, are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. Mutual funds and ETFs are not guaranteed, and past performance may not be repeated.

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Guardian Capital LP is the Manager of the Guardian Capital mutual funds and ETFs. Guardian Capital LP is a wholly-owned subsidiary of Guardian Capital Group Limited, a publicly traded firm, the shares of which are listed on the Toronto Stock Exchange. For further information on Guardian Capital LP or its affiliates, please visit www.guardiancapital.com. All trademarks, registered and unregistered, are owned by Guardian Capital Group Limited and are used under license.

Date published: November 24, 2025