MNI POLICY: BOC Balance Sheet Up CAD25B To Record CAD442B

By Greg Quinn

     OTTAWA (MNI) - The Bank of Canada's balance sheet grew to a record CAD442

billion from CAD417 billion led by federal t-bills, with Governor Stephen Poloz

saying this week that aggressive moves will help the economy recover from

Covid-19 shutdowns. 

     Federal t-bill holdings led the increase in the week ending May 20 to

CAD91.7 billion from CAD79.8 billion. Canada government bond holdings rose to

CAD125 billion from to CAD119 billion, keeping on the BOC's pledge to buy at

least CAD5 billion a week until the recovery is well underway. 

     The balance sheet now equals 19% of fourth-quarter GDP, a figure likely to

rise next Friday with a report showing how much first quarter output shrank as

health shutdown began. Governor Stephen Poloz on Thursday said central banks

must keep developing other tools with interest rates likely stuck around

historic lows for a while, and policy must be "easier for longer" if pandemic

shutdowns are prolonged. 

     Repos remained the bank's biggest holding at CAD201 billion, up from CAD194

billion. The second week of the new CAD50 billion provincial bond program saw

modest buying, with purchases climbing to CAD826 million from CAD229 million.

     The BOC this week also laid out guidelines to allocate provincial bond

purchases based on each region's GDP and share of the debt market, and similar

measures for its yet-to-launch CAD10 billion corporate bond program. Sources

told MNI that federal authorities will likely limit aid to indebted provincial

governments to what's needed to ride out the pandemic, to shield policy

independence.

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

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