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Free AccessMNI POLICY: BOC Gives Details of CAD727M Province Bond Buys
--Also Lays Out Terms For CAD10B Corporate Bond Purchase Plan
By Greg Quinn
OTTAWA (MNI) - The Bank of Canada said Tuesday it has bought CAD727 million
of provincial government bonds within the first week of the new program to
support local finances amid the pandemic, breaking out each province's share of
the portfolio in a newly expanded public disclosure report.
The first four operations from May 7-13 all took up less than the maximum
amount of bonds the BOC offered to buy, according to data published on its
website. The previous report Friday showed CAD229 million of provincial bonds as
balance sheet assets.
The BOC said each province's share of the program's benchmark portfolio
will be updated monthly. Last week Senior Deputy Governor Carolyn Wilkins said
the allocations are weighted based on a province's GDP and its share of the bond
market.
On Tuesday the BOC said Ontario would account for 42.3% of the portfolio,
followed by Quebec at 21.8%. Hard-hit energy producing provinces Alberta and
Newfoundland have 12.7% and 1.7%, respectively. The BOC won't buy more than 20%
of a government's outstanding assets and doesn't have a minimum rating
requirement.
The one-year CAD50 billion program aims at ensuring smooth trading as
governments face record deficits on Covid-19 relief payments and extra
healthcare costs. Experts and former advisers have told MNI the program is
needed in a crisis and questions about moral hazard won't become important in
the short term. The BOC's balance sheet last week grew to a record CAD417
billion.
"The Bank of Canada continues to closely monitor global and domestic market
developments and remains committed to providing all the liquidity the financial
system needs so that it can continue to serve Canadians," the BOC said in a
statement.
--CORPORATE CREDIT PLANS
The BOC also gave more details for its plan to buy up to CAD10 billion of
corporate bonds, saying "the Bank's purchases will aim to reflect a reference
portfolio based on sectoral shares of eligible assets outstanding."
The purchases won't be for more than 10% the value of an issuer's
outstanding debt as of April 15, and unlike the provincial program face some
explicit limits on credit ratings. Debt will be eligible if it has "at least one
rating of BBB Mid/BBB/Baa2" as of April 15 when the program was announced.
--MNI Ottawa Bureau; +1 613-314-9647; email: greg.quinn@marketnews.com
[TOPICS: M$C$$$,MC$$$$,MR$$$$,M$$CR$,M$$FI$,MN$FI$]
To read the full story
Sign up now for free trial access to this content.
Please enter your details below.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.