MNI POLICY: BOC Balance Sheet at Record CAD417B on T-Bills

--Debut of Provincial Bond Purchases Is Small At CAD229M

By Greg Quinn

     OTTAWA (MNI) - The Bank of Canada's balance sheet grew to a record CAD417

billion led by federal t-bills, while the start of a CAD50 billion provincial

bond purchase program was for a modest CAD229 million.

     Federal t-bill holdings led the increase, rising to CAD79.8 billion from

CAD65.8 billion, and government bonds rose to CAD119 billion from CAD112

billion. The BOC plans to buy at least CAD5 billion of Canadian government bonds

a week until the recovery from Covid-19 is well underway. 

     Repos remained the biggest holding at CAD194 billion, up from CAD189

billion. 

     Governor Stephen Poloz on Thursday said stabilization policies have kept

the economy from a more severe crisis and are restoring market functioning.

"Bid-ask spreads and yield spreads in many markets have narrowed significantly.

Access to liquidity for financial institutions has greatly improved. And many of

our programs to support financial markets are being used less and less as

conditions stabilize" Poloz said at a press conference. 

     The BOC also told MNI Thursday it will offer more transparency around its

asset purchases next week. 

     The BOC has grown its balance sheet after cutting interest rates to about

zero and all but ruling out negative borrowing costs. Incoming Governor Tiff

Macklem has signaled he will continue with aggressive asset purchases when he

takes over next month as Poloz retires. 

     Former officials have told MNI that the BOC's balance sheet could grow from

10% of GDP last month to as much as 30%, or up to CAD700 billion. 

--MNI Ottawa Bureau; +1 613-314-9647; email: greg.quinn@marketnews.com

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