MNI POLICY: BOC Balance Sheet +CAD12B to Record CAD521B

The Bank of Canada's balance sheet climbed CAD12 billion to

a record CAD521 billion led by federal bonds and bills this week while repos

had

their first significant decline since the coronavirus pandemic emerged.

Federal bonds increased CAD8 billion to CAD160 billion, faster than the

minimum CAD5 billion a week target, and t-bills by CAD6 billion to CAD124

billion. Holdings of repos fell CAD2 billion to CAD209 billion, according to

figures the Ottawa-based bank posted Friday.

Governor Tiff Macklem on Monday said QE is keeping yields low across the

curve and will remain in place until the recovery is well underway, downplaying

other tools like cutting the 0.25% policy interest rate any further. The

governor said he's willing to expand QE as needed and said his main principle

for getting through the unprecedented downturn is to "crush" the crisis.

Government debt purchases make it easier to finance a federal deficit

heading towards CAD260 billion this fiscal year, to pay out relief checks and

backstop corporate loans. Canada lost its AAA credit rating from Fitch this

week

and Finance Minister Bill Morneau said he's looking at extending the

government's debt duration to ease rollover risk.