Foreign investors bought record amounts of Canadian government debt in 2025, helping to lower Prime Minister Mark Carney's borrowing costs and providing unexpected fiscal relief. According to data from Statistics Canada, non-resident holdings of Canadian federal bonds reached an all-time high of $1.2 trillion by the end of the year, up 15% from the previous record set in 2024.
Increased demand drives down yields
The surge in foreign demand pushed down bond yields, reducing the government's cost of servicing its debt. The yield on Canada's 10-year government bond fell to an average of 2.8% in 2025, down from 3.2% in 2024. This decline saved the federal government an estimated $8 billion in interest payments, according to a report by the Parliamentary Budget Officer.
Kai Lam, chief investment officer at JCIC Asset Management, told BNN Bloomberg that the trend reflects global investors' search for safe-haven assets amid geopolitical uncertainty. “Canada is seen as a stable economy with strong fiscal management, which attracts foreign capital,” Lam said.
Impact on Carney's fiscal agenda
The lower borrowing costs have given Prime Minister Carney more room to pursue his infrastructure and green energy spending plans without increasing the deficit. In the 2025 federal budget, the government allocated $50 billion for new infrastructure projects and $30 billion for climate initiatives. Finance Minister Chrystia Freeland noted that the favorable debt conditions allowed the government to borrow at historically low rates.
However, some economists warn that reliance on foreign investors could expose Canada to sudden capital outflows if global risk sentiment shifts. The Bank of Canada has flagged this as a potential vulnerability in its financial system review.
