MNI POLICY: BOC Balance Sheet Record CAD498B on Federal Debt

By Greg Quinn

     OTTAWA (MNI) - The Bank of Canada's balance sheet grew CAD18 billion to a

record CAD498 billion this week with government bonds and bills dominating the

increase while the need for corporate liquidity waned.

     Federal t-bill holdings climbed CAD8 billion to CAD116 billion, and federal

bonds by CAD7 billion to CAD145 billion, figures through June 10 posted late

Friday showed. The bond purchases are faster than the BOC's minimum pledge to

acquire at least CAD5 billion a week until the economic recovery is well

underway. 

     Governor Tiff Macklem may reiterate his pledge for aggressive action when

he testifies at the House of Commons finance committee Tuesday, his first public

remarks since taking over from Stephen Poloz on June 3. 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 central bank is also rolling out programs to buy up to CAD50 billion of

provincial government bonds, up to CAD10 billion of corporate bonds, and 40% of

provincial t-bills.

     Repos climbed by less than CAD2 billion to CAD211 billion, continuing a

trend of slower expansion seen since late April. Purchases of short-term

corporate bankers' acceptances fell to CAD3.7 billion, continuing a decline from

a peak of CAD38.8 billion on April 8.

     The balance sheet now equals 22% of first-quarter GDP annualized. 

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

--MNI Washington Bureau; +1 202-371-2121; email: jean.yung@marketnews.com

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