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By Greg Quinn
OTTAWA (MNI) - The Bank of Canada's balance sheet grew CAD21.7 billion this
week to a record CAD464 billion on government debt and repos to aid markets
strained by Covid-19.
Central bank holdings of federal t-bills rose to CAD104 billion from
CAD91.7 billion, and Canadian bonds to CAD133 billion from CAD125 billion. The
BOC also held another CAD7.9 billion of provincial debt, reflecting early weeks
of plans to buy CAD50 billion of local government bonds and 40% of their
Governor Stephen Poloz told lawmakers Monday it will be a while before the
economic recovery is advanced enough to scale back a pledge to buy at least CAD5
billion a week of federal bonds. While a good deal of purchases are assets due
in a year that can be taken off the balance sheet, the BOC is also prepared to
do more if markets show more strain, Poloz said.
The bond purchases ease the strain of financing a federal deficit that
Parliament's budget officer said will reach a record CAD260 billion. That's
tracking to around 15% of GDP.
The BOC will likely hold its key lending rate at 0.25% on June 3, and some
economists say one potential change is boosting the facility buying up to CAD10
billion of corporate bonds. Tiff Macklem who takes over next week has echoed the
need for aggressive asset purchases to support markets.
Repos remained the bank's biggest single holding at CAD204 billion, up from
CAD201 billion last week.
The balance sheet now equals 20% of first-quarter GDP annualized. Through
last month, the BOC's holdings of federal bonds were 17% of the total stock.
--MNI Ottawa Bureau; +1 613-314-9647; email: email@example.com