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Free AccessMNI POLICY: TEXT: Highlights of Canada Annual Debt Strategy
Following are highlights from the Canadian finance department's annual debt strategy, released as part of the federal budget on Monday:
"The government has a plan to more than double, compared to 2019, the share of its annual bond issuance dedicated to long-term debt. Over the next several years, these actions will result in the government's average term to maturity for its domestic market debt to reach a level not seen in over 40 years."
Canada will be "re-opening the ultra-long 50-year bond in 2021-22, and continuing to issue in this sector in coming years."
"The aggregate principal amount of money to be borrowed by the government in 2021-22 is projected to be $523 billion."
"The size of the program reflects both requirements to refinance debt of $332 billion, including the large maturing stock of short-term debt issued in 2020-21 in response to the COVID-19 pandemic, as well as the projected financial requirement of $191 billion to support the recovery in 2021-22."
"Despite record borrowings to support Canadians and the economy during the COVID-19 pandemic, public debt charges are projected to remain sustainable at $22.1 billion for 2021-22, representing 0.9 per cent of GDP. Even though interest rates are forecasted to increase throughout the forecast horizon, public debt charges are projected to only rise to 1.4 per cent of GDP by 2025-26 to a level of $39.3 billion."
The report also said that if market conditions change for long-term debt, it can shift back to treasury bills. Canada plans its first green bond sale with a target of CAD5 billion, and will also explore "social bonds" that promote inclusion and broad-based prosperity.
"Before the pandemic, 15 per cent of the bonds issued by the government were issued at maturities of 10 years or greater. Over the course of 2020, federal government allocations of long bonds rose to about 29 per cent. The government is now proposing to increase that proportion to 42 per cent."
Total bond and bill sales will decline to CAD512 billion this fiscal year from last year's CAD593 billion.
"Given the Bank of Canada's purchases of Government of Canada bonds in the secondary market, regular, switch, and cash management bond buyback operations are not planned for 2021-22."
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