Canada

Friday, June 5, 2020 - 18:40

MNI POLICY: BOC Balance Sheet +CAD15.7B to Record CAD480B


By Greg Quinn

OTTAWA (MNI) - The Bank of Canada's balance sheet grew CAD15.7 billion to a record CAD480 billion to aid markets strained by Covid-19, as new Governor Tiff Macklem endorsed plans to buy at least CAD5 billion a week until the economic recovery is well underway.

Gains through June 3 reported on Friday were again led by repos and federal government debt. Repos climbed to CAD210 billion from CAD204 billion, and Canada bonds to CAD138 billion from CAD133 billion.

Government debt has overtaken the value of corporate facilities in the pandemic, a reversal the global financial crisis a decade ago. BOC holdings of federal t-bills rose to CAD108 billion and provincial debt to CAD9.5 billion, and the central bank has committed to buying 40% of provincial t-bills and up to CAD50 billion of their bonds.

The bond purchases ease the strain of financing a federal deficit that Parliament's budget officer said will reach a record CAD260 billion. That's tracking to around 15% of GDP.

--GROW AS NEEDED

"The Bank is prepared to augment the scale of any of its programs if needed to support market functioning," Deputy Governor Toni Gravelle said Thursday, the day after Macklem took over as Governor from Stephen Poloz. "As market function improves and containment measures ease, the Bank's focus will shift to supporting the resumption of growth in output and employment."

The BOC on Wednesday scaled back programs to finance term repos and buy bankers' acceptances, citing improvements in those markets, and affirmed it sees the current 0.25% policy rate as being the lower bound.

The balance sheet now equals 21% of first-quarter GDP annualized.

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

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