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Hot Canadian bond market liable to leave some burned

Canadians have an apparently unquenchable thirst for yield. In the 24 months through September, investors poured a net $27-billion into bond funds in Canada, at the same time as they redeemed $24-billion in equity funds, according to the Investment Funds Institute of Canada.

Those who are pouring their money into bonds should pay heed to what’s happening behind the scenes. As bond fund managers chase yields at a time of rock-bottom interest rates, there are early signs the traditionally conservative Canadian debt market is getting frothy. That could be setting investors up for disappointment later on.