One expert says more tech firms may launch Canadian-dollar deals, as well as new AI-capex-related issuance from utilities, pipeline companies and data-centre-adjacent real estate issuers.Funtap/iStockPhoto / Getty Images
The rather sleepy Canadian bond market was shaken up this spring when two of the biggest U.S. tech companies made huge issuances of maple bonds. That has since raised questions about the impact for bond investors and whether there are significant risks below the surface.
These issues of maple bonds, fixed-income instruments issued by foreign firms denominated in Canadian dollars, pushed the total in 2026 to at least $33.8-billion, setting a new annual record that surpassed the $19.2-billion issued in 2021, according to Royal Bank of Canada data.
On May 5, Alphabet Inc. raised $8.5-billion in a four-part deal. Then, on June 8, Amazon.com Inc. came to market with a $14-billion five-tranche issue. Both companies indicated they were raising funds to help fund spending on artificial intelligence-related data centres.
“These are very high-quality names, of course. But these deals are also large enough to affect index composition and spreads,” says Adrienne Young, senior vice-president and director of Canadian corporate credit research at Franklin Templeton Canada.
Specifically, she says the AA-rated portion of the bond market has experienced the largest increase in size and the most material widening of payout rate spreads.
“That reflects the rapid change in supply and demand,” Ms. Young says. “In other words, a bit of market indigestion.”
She notes there has been weakness at the longer end of the AA “bucket,” where there was a “real dearth of paper” before these new issues came to market.
Ms. Young says she expects we may see more tech firms launch Canadian-dollar deals, as well as new AI-capex-related issuance from utilities, pipeline companies and data-centre-adjacent real estate issuers.
One concern stemming from these supersized bond issues is whether the bond market is becoming more concentrated, as the stock market is.
Yet, Ms. Young says “at the most basic level,” new AI-related issuance isn’t making the bond market more concentrated. She notes the Canadian corporate bond market is already more concentrated than most retail investors understand. For example, banks and other financials make up more than 25 per cent. So, adding hyperscalers to the universe actually increases diversification.
However, she says the extra-large issuances could eventually create pockets of benchmark and thematic concentration.
“A portfolio may look diversified by issuer count or sector label, but still have a lot of exposure to the same underlying driver,” she says.
Technology, communications, utilities, pipelines, power generation, real estate investment trusts and some industrials may all now have some connection to the AI infrastructure cycle.
As far as being a buyer of the big tech maple bonds, Ms. Young says Franklin Templeton Canada isn’t avoiding the sector categorically, but is being selective.
“For us, the decision comes down to valuation,” she says, noting the long-dated hyperscaler bonds have been underperformers of late. “The short answer is we look at these deals, but we don’t treat them as automatic buys.”
Other Canadian fixed-income investors also see risks in these foreign players’ large issuances.
“The Canadian corporate bond market is not yet concentrated in large technology companies, but we think the direction is worth watching,” says Hadiza Djataou, managing director, portfolio manager and head of fixed income macro at Mackenzie Investments.
“Repeated borrowing by a relatively small group of issuers could gradually move the market in that direction.”
Ms. Djataou says she sees concentration risk developing somewhat differently in bonds than in stocks.
In an equity index, she notes, a company’s weight generally rises because its market value increases. In a bond index, an issuer can become a larger weight simply by borrowing more.
“The concern for us is therefore less about any one transaction and more about the cumulative impact of repeated issuance,” she says.
“If a small group of technology companies continues returning to the market with multi-billion-dollar deals, their weights in corporate bond indexes and investor portfolios could rise quickly.”
Ms. Djataou says the impact on fund managers’ ability to achieve suitable diversification is “nuanced.”
Like Ms. Young, she notes these issuers bring something the Canadian corporate bond market has historically lacked: meaningful exposure to large, high-quality technology companies.
“Adding technology bonds gives us another sector to choose from and, in that sense, improves diversification,” she says.
However, Ms. Djataou says the challenge is the size of the deals and the similarity of the underlying risks. She has concerns that a small number of issuers can quickly become significant positions in an index or portfolio and that these companies are investing in many of the same areas, including data centres, computing capacity and AI infrastructure.
Mackenzie Investments has been a “selective” buyer of the technology company maple bonds, Ms. Djataou says.
Although she says these companies generally have strong balance sheets, resilient businesses and significant financial resources, “for us, the question is not whether they’re good companies. It’s whether the spreads being offered provide enough compensation for the risks, particularly given how quickly their capital requirements are changing.”
Ms. Djataou adds that it’s too early to know which companies will earn the strongest returns on their AI spending. She notes that AI may create significant long-term value, but the timing of those returns and how they will be divided across the industry remain uncertain.
Given the scale of the spending and the uncertainty surrounding future returns, spreads are more likely to widen before they tighten, she says. Therefore, Mackenzie Investments prefers to remain patient and wait for entry points in which they’re being paid more appropriately for the risks they are taking.