MNI:Canada Finmin Sees C$119B Gross Bond Issuance in FY19-20

- No Plans To Issue Ultra-Long Bonds

By Yali N'Diaye

     OTTAWA (MNI) - Canadian Finance Minister Bill Morneau tabled a C$19.8

billion budget deficit for fiscal year 2019-2020 in the House of Commons

Tuesday, creating a federal debt-to-GDP ratio of 30.7% that is forecast to

diminish through 2024.

     Still, the budget won't be balanced throughout the projection horizon: the

deficit would still be C$9.8 billion for fiscal year 2023-2024, when the federal

debt would represent 28.6% of GDP.

     Finance Minister Bill Morneau, during a press conference, declined to

suggest any timeline to bring back the budget to balance, arguing that it is

more important to invest in Canada's middle class.

     To finance its budget deficit and other requirements, the government will

issue a gross amount of C$119 billion in bonds in FY2019-20, while building

liquidity in treasury bills.

     - Focus On T-Bill Liquidity

     As a result, the stock of T-Bills is expected to reach C$151 billion by the

end of FY2019-2020, up from C$131 billion by the end of FY2018-19.

     This increase brings the share of T-Bills in total market debt to 20% from

18%, with the total stock of debt rising to C$754 billion by the end of

FY2019-20 from C$723 billion.

     Issuances of 3-, 6-, and 12-month T-Bills will continue to occur bi-weekly,

with an auction size of C$9-C$15 billion each, little changed from C$8-C$14

billion the previous fiscal year. However, to reach the C$151 billion stock of

T-Bills, the government will likely increase the size of each auction within the

range, from last year's issuances which were generally closer to the lower end

of the range.

     The government will continue to use cash management bills in 2019-20.

     -- Abandoning 50Y Bonds

     At the longer end of the curve, the government plans to issue a gross

amount of C$119 billion bonds, up from C$100 billion in FY2018-19.

     Issuing 50-year ultra-long bonds is no longer part of the debt management

strategy.

     So far, the government has issued 50-year ultra-long bonds on an

opportunistic basis, based on market conditions, an approach that has not been

well received by markets given a lack of predictability.

     Other changes include the reduction of the number of auctions to 4 for

10-year notes, and to 3 for real return bonds.

     Elsewhere, the government will issue 16 2-year notes, 8 3-year notes, 8

5-year notes, and 3 30-year bonds for 2019-2020.

--MNI Ottawa Bureau; +1 613 869-0916; email: yali.ndiaye@marketnews.com

[TOPICS: M$C$$$]