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Free AccessMNI: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$$$]
To read the full story
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.