Canada announced on Tuesday that it plans to undertake one of the largest bond issuance programs in a non-pandemic year, with a significant emphasis on selling longer-term debt, as outlined in its annual budget plan.
The Canadian government intends to issue approximately C$228 billion (equivalent to US$165 billion) in bonds over the next fiscal year, ending on March 31, 2025. This represents an increase from the C$204 billion issued during the preceding fiscal year and the C$185 billion issued during the 2022-23 period. Notably, during the peak of the pandemic in the 2020-21 fiscal year, Canada issued a staggering C$370 billion in bonds.
The rationale behind this heightened borrowing activity is attributed to the ongoing need to finance maturing debt obligations and meet financial requirements. The government’s debt-management strategy underscores the importance of mitigating refinancing risk and minimizing volatility in public debt charges, particularly amid the uncertain trajectory of interest rates.
To achieve these objectives, Canada plans to prioritize the issuance of longer-term debt, with a focus on 10- and 30-year bonds. The government aims to issue C$76 billion in such longer-term securities over the next 12 months, compared to C$61 billion in the previous fiscal year. This shift is expected to increase the proportion of debt issued with maturities exceeding 10 years to 33%, up from 30% in the prior year.
In terms of specific bond yields, Canada anticipates that the yield on its 10-year bonds will hover around 3.3% over the next five years. Additionally, the issuance of five-year bonds is slated to rise to C$60 billion in the current fiscal year, up from C$47 billion in the previous period. Meanwhile, treasury-bill issuance is projected to remain largely unchanged at approximately C$272 billion over the next 12 months.
Overall, Canada anticipates that its total market debt will swell to C$1.441 trillion in the 2024-25 fiscal year, reflecting a substantial increase from the pre-pandemic level of C$765 billion. This underscores the significant fiscal measures undertaken by the Canadian government to address the economic challenges posed by the pandemic and support ongoing recovery efforts.