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Canada Fall Economic Statement Takeaways [1/2]

CANADA
  • Fiscal path: The deficit for the current fiscal year was essentially unchanged at C$40bn from C$40.1bn in the Budget 2023 projection. It's then seen at C$38.4bn in FY 24/25 (from C$35.0bn), before backloaded spending more notably lifts deficits further out the forecast vs Budget 2023. Scotia: “Economic and fiscal developments since last March’s budget are expected to drive a further deterioration of $19 bn in budget needs between FY24 and FY28. The government meanwhile folds in an additional $21 bn in net new measures (FY24–29) broadly in line with expectations. The bulk of this reflects previously announced industrial supports ($8.5 bn) and the GST waiver for rental housing ($4.6 bn).”
  • Issuance: A “large increase in issuance” in TD’s words and the “main development from the FES” in RBC’s. Bond issuance is projected at C$204bn for FY 23/24 (from C$172bn in the budget and the recent annualized pace of C$185bn). T-bill issuance is seen increasing to C$281bn for FY 23/24 (from C$242bn). The increase in GoC issuance is across all sectors including longs and most notable in 30s (from C$10bn in Budget to C$14bn) and 10s (from C$40bn in Budget to C$43bn quarterly pace to now C$47bn), having earlier this quarter been mainly 2s and 5s.
  • RBC: “There is a stark increase in [bond] issuance for this fiscal year (FY23/24) […] Additionally, the bill stock at the end of FY23/24 rose from C$242bn to C$281bn. However, the budget balance was little changed and financial requirements were up C$19bn, so it is not due to a sizable fiscal loosening. Instead, it looks at least in part due to pre-funding for cash management purposes, including a C$37bn maturity on April 1st (first day of FY24/25, which requires funding in FY23/24).”
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