MNI POLICY: Canada May Extend Debt Duration as Deficit Swells

By Greg Quinn

     OTTAWA (MNI) - Canadian Finance Minister Bill Morneau said Tuesday the

government may shift into more long-term debt to avoid the risk of a squeeze on

short-term securities, a need that has arisen amid unprecedented spending to

halt Covid-19.

     "One of the things that we are making sure we do as we manage the treasury

function of the government is to ensure that we have the balance between the

risk of rollover and the risk of the cost of longer debt," Morneau told a Senate

hearing in Ottawa. 

     "As we accrue more debt, we are looking at extending the term and duration

of our debt in order to provide us with less rollover risk," Morneau said.

     Senators pressed Morneau to confirm remarks from Parliament's independent

budget officer that the federal debt may reach CAD1 trillion, but he declined to

give a precise figure. The finance department's monthly fiscal update showed a

CAD704 billion debt as of March. Combined with a deficit the budget officer

estimates at more than CAD250 billion for the fiscal year that began April 1,

debt is nearing the trillion dollar mark. 

     Morneau declined to give his own fiscal numbers under questioning from

senators, saying he plans a partial update on July 9. Asked by a senator if she

will see deficit and debt figures in that snapshot, Morneau said "Yes, you

will."

     The National Bank Financial brokerage Tuesday estimated Canada will sell a

record CAD105b of bonds in Q3, based on government's quarterly schedule

published last week. Net sales to the market will be just CAD18 billion after

BOC's regular allotment at auction and its CAD5 billion a week of QE. T-bill

sales have likely crested after an initial burst of federal borrowing,

Montreal-based NBF said in a report.

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

[TOPICS: M$C$$$,MC$$$$,M$$FI$]