Canada's municipal and local government authority (MLGA) bond market continues to grow, with record sales, outstanding debt and secondary market activity in the first half of 2026, according to National Bank of Canada in a note Friday.
The expansion reflects a stronger focus on strategic infrastructure investment, with local governments playing a key role in delivering major capital projects, said National Bank.
"While all levels of government in Canada have made capital investment a top priority, the local government sector is a vital cog in the infrastructure machine," wrote Warren Lovely, the bank's chief rates and public sector strategist, in the note.
Despite rapid supply growth, MLGA credit quality remains strong, added National Bank. Ratings are generally higher and more stable than provincial peers, while spreads have remained resilient amid economic and geopolitical uncertainty.
MLGA bond sales exceeded C$6 billion in the first half of 2026, up about 40% year over year. Despite a likely seasonal slowdown in the second semester of 2026, including election-related issuance constraints, full-year supply is expected to reach a new record in 2026, surpassing the previous high of C$8.7 billion in 2025, according to the bank.
The expanding MLGA bond market offers investors a growing pool of high-quality, increasingly liquid securities, said Lovely.