MNI POLICY: BOC Weekly Balance Sheet Growth Slows to CAD7.5B

--Pace Set To Increase As Fresh BOC Bond Buys Kick In

By Greg Quinn

     OTTAWA (MNI) - The Bank of Canada's CAD7.5 billion balance sheet growth

over the latest reporting week was the slowest since policy makers stepped in to

aid markets disrupted by Covid-19, though the pace may pick up as new programs

for CAD60 billion of provincial and corporate bond purchases start.

     The slower gain still pushed assets held to another record of CAD392

billion as of May 6 according to figures posted over the weekend. 

     Federal T-bill holdings led the increase, moving to CAD65.8 billion from

CAD54 billion, and government bond purchases rose to CAD112 billion from CAD106

billion. Those gains were curbed by holdings of short-term corporate loans,

known as bankers' acceptances, which declined to CAD11 billion from CAD25

billion. 

     Results this week may show the first purchases of provincial debt the BOC

said will be for up to CAD50 billion, a move with no modern precedent. The terms

set no specific floor on the credit ratings and don't disclose what regional

governments' debt is being purchased. 

     Governor Stephen Poloz made asset purchases the main focus of policy last

month when he cut the benchmark interest rate to about zero, and has pledged to

buy at least CAD5 billion of federal government debt a week until a recovery is

well established. Incoming Governor Tiff Macklem has signaled he will continue

with aggressive asset purchases when he takes over next month as Poloz retires. 

     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. 

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

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