MNI BRIEF: Highlights of Canada Debt Strategy

Canada’s budget includes a new debt management strategy including these highlights:

• Canada plans to borrow CAD421 billion this fiscal year, 85% is refinancing existing debt
• Of the total, CAD242 will be t-bills, up from the current stock of CAD202 billion. Bond sales will decline CAD13 billion to CAD172 billion. The equivalent of CAD7 billion will be in foreign currencies. Annual borrowing peaked at CAD593 billion during the pandemic
• Canada will continue moving away from a historically high share of long-term debt sales chosen during the pandemic. The share of debt maturing in 10 years or more will remain 29% versus the 20% average in the previous decade
• Three-year bond sales will end in the second quarter of the fiscal year starting April 1, due to reduced borrowing needs. Sales up until that point will help establish a liquid benchmark, the government said
• The finance department will consult with investors about bringing Canada Mortgage Bonds backed the federal housing agency within the government’s regular borrowing program
• The move could help lower financing costs since CMBs carry a yield premium despite sharing a triple-A credit rating with federal government debt. The review will be finished for the fall fiscal update