MNI POLICY: BOC Balance Sheet Rises to CAD384B on Repos, Bills

By Greg Quinn

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

CAD384 billion on Friday, with incoming Governor Tiff Macklem signaling he will

continue with aggressive asset purchases to heal the economy after the Covid-19

slump.  

     Assets as of April 29 climbed from CAD349 billion a week earlier, according

to the Ottawa-based central bank's website. Repos climbed to CAD181 billion from

CAD167 billion, and T-bills to CAD54 billion from CAD38 billion. 

     Macklem affirmed that asset purchases will remain the policy focus when he

takes over in June by agreeing the current 0.25% overnight borrowing rate is the

effective lower bound. Policy makers led by Stephen Poloz on April 15 said they

could increase plans to buy at least CAD5 billion a week in federal debt, and

committed to start buying up to CAD50 billion of provincial bonds and up to

CAD10 billion of corporate bonds. 

     "The bold actions that the Bank of Canada have taken to provide liquidity

to the system are extremely helpful," Macklem said at a press conference Friday

when his appointment was announced.

     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. 

     --DEFICIT FINANCING

     Government of Canada bond holdings rose to CAD106 billion from CAD98

billion this week. Continued purchases make it easier for Finance Minister Bill

Morneau to pay for a deficit the budget office says will top CAD250 billion or

13% of GDP, a postwar record.

     Holdings of short-term credit known as Bankers' Acceptances declined for a

third week, this time to CAD25 billion from CAD28.3 billion. That suggests

companies have passed the first wave of a squeeze on short-term cash needs. 

     Mortgage bond purchases, one of the major bulwarks against the global

financial crisis a decade ago, remain modest at CAD4 billion. 

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

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