Debt Management Report 2022-2023

Table of Contents

• Foreword by the Deputy Prime Minister and Minister of Finance
• Purpose of This Publication
  • Other Information
• Executive Summary
  • Introduction
  • Highlights for 2022-23
• Part I: 2022-23 Debt Management Context
  • Composition of Federal Debt
  • Sources of Borrowings and Uses of Borrowings
  • Borrowing Authorities
  • Government of Canada Credit Rating Profile
• Part II: Report on Objectives, Strategic Direction and Principles
  • Objectives, Strategic Direction and Principles
  • Raising Stable and Low-Cost Funding
  • Maintaining a Well-Functioning Government Securities Market
• Part III: Report on the 2022-23 Debt Program
  • Domestic Marketable Bonds
  • Treasury Bills and Cash Management Bills
  • Foreign Currency Debt
  • Cash Management
  • Investment of Receiver General Cash Balances
• Annex 1: Completed Treasury Evaluation Reports
• Annex 2: Debt Management Policy Measures Taken Since 1997
• Annex 3: Glossary
• Annex 4: Contact Information
• Reference Tables

Foreword by the Deputy Prime Minister and Minister of Finance

Following a robust recovery from the pandemic recession, Canada's economy has remained resilient. Our unemployment rate remains low; over a million more Canadians are employed today compared to when the pandemic first hit; and wage growth has outpaced inflation for the past nine months.

Following the unwinding of pandemic-era emergency supports, Canada's rate of fiscal consolidation has been the fastest in the G7, and we maintain both the lowest deficit and lowest net debt-to-GDP ratio of any G7 country. Together with Germany, Canada is one of only two G7 economies to have a AAA credit rating from at least two of the three major ratings agencies. In early November, Moody's reaffirmed Canada's AAA rating with a stable outlook.

Our government is continuing to deliver on our commitment to responsible fiscal management. In the 2023 Fall Economic Statement, we announced further reductions in public sector spending, as well as other steps to ensure Canada's finances remain sustainable, which will allow us to continue to responsibly invest in Canadians for years to come. Combined with the $15.4 billion in savings introduced in Budget 2023, the government will be saving $4.8 billion per year in 2026-27 and ongoing, helping to return the public service closer to its pre-pandemic growth track.

Every year, the federal government provides a report to Parliament and Canadians that details the government's domestic debt program. This report reflects the main activities of the government's borrowing program, as set out in the 2022-23 Debt Management Strategy, and is guided by the key principles of transparency, regularity, prudence, and liquidity. As in the past, the government has consulted dealers and investors as part of the process for developing the debt management strategy.

Our continued commitment to responsible fiscal management ensures the government's ability to invest in Canadians and the Canadian economy for years to come.

Canada has a proud tradition of fiscal responsibility—and we will ensure that tradition is maintained.

The Honourable Chrystia Freeland, P.C., M.P.
Deputy Prime Minister and Minister of Finance
Ottawa, 2023

Purpose of This Publication

This edition of the Debt Management Report provides a detailed account of the Government of Canada's borrowing and debt management activities for the fiscal year ending March 31, 2023.

As required under Part IV (Public Debt) of the Financial Administration Act (the "FAA"), this publication provides transparency and accountability regarding these activities. It reports on actual borrowing and uses of funds compared to those forecast in the Debt Management Strategy for 2022-23, published on April 7, 2022, in Budget 2022. It also discusses the environment in which the debt was managed, the composition of the debt, changes in the debt during the year, strategic policy initiatives and performance outcomes.

Other Information

The Public Accounts of Canada is tabled annually in Parliament and is available on the Public Services and Procurement Canada website. The Debt Management Strategy and the Report on the Management of Canada's Official International Reserves, which are also tabled annually in Parliament, are available on the Department of Finance Canada website. Additionally, monthly updates on cash balances and foreign exchange assets are available through The Fiscal Monitor, which is also available on the Department of Finance Canada website. Under the Borrowing Authority Act (the "BAA"), the Minister of Finance (the "Minister") is required to table a report to Parliament every three years on amounts borrowed by the Minister on behalf of His Majesty in right of Canada and by agent Crown corporations, and on Canada Mortgage Bonds guaranteed by Canada Mortgage and Housing Corporation. The most recent report was tabled in Parliament on November 23, 2020 and is available on the Department of Finance Canada website.

Executive Summary

Introduction

This publication reports on two major activities: (i) the management of federal market debt (the portion of the debt that is borrowed in financial markets); and (ii) the investment of cash balances in liquid assets for operational purposes and contingency planning.

The government's market debt, including marketable bonds, treasury bills, retail debt and foreign currency debt, stood at $1,259.9 billion at the end of fiscal year 2022-23 (see boxed area of Chart 1). In addition to market and other types of unmatured debt, other liabilities brought the total liabilities of the Government of Canada to $1,925.0 billion at that time. When financial and non-financial assets^{Footnote 1} are subtracted from total liabilities, the federal debt or accumulated deficit of the Government of Canada was $1,173.0 billion as at March 31, 2023 (see Chart 1).

Domestic funding is conducted through the issuance of marketable securities, which consist of nominal bonds, green bonds and treasury bills, including cash management bills. These securities are generally sold through competitive auctions (occasionally through a syndication process at the government's discretion, such as for green bonds) to government securities distributors, a group of banks and investment dealers in the Canadian market. These government securities distributors then resell these securities to their wholesale and retail clients in the secondary market.

Government of Canada marketable securities are widely held and can be found in retail and institutional investment portfolios, insurance companies and pension funds, central banks (including the Bank of Canada), as well as a variety of other investment vehicles. Overall, about 71 per cent of Government of Canada market debt was held by Canadian investors, including the Bank of Canada, as well as insurance companies and pension funds, and financial institutions and provincial and municipal governments. The participation of international investors in Government of Canada securities markets is of benefit to Canadians, as they serve to increase competition, increase the diversity of the government's investor base, and ultimately reduce borrowing costs for Canadian taxpayers.

Cross-currency swaps and issuance of foreign currency debt are used to fund foreign reserve assets held in the Exchange Fund Account (see the section entitled "Foreign Currency Debt").

Highlights for 2022-23

The Debt Management Report consists of three parts covering the main aspects of the Government of Canada's debt program. "Part I – 2022-23 Debt Management Context" focuses on the state of the accumulated deficit (i.e., federal debt), the year's financial requirements and the sources of borrowings used to raise funds, the federal government's credit ratings, and the authorities required to borrow. "Part II – Report on Objectives, Strategic Direction and Principles" reports on debt management objectives to implement the government's strategic direction to raise stable and low-cost funding to meet the financial needs of the Government of Canada, and to maintain a well-functioning market for Government of Canada securities."Part III – Report on the 2022-23 Debt Program" reports on the operational aspects of the market debt program.

This year's debt management operations continue to support the effective execution of the debt management program. The main highlights are as follows:

Bond Program

In 2022-23, changes were made to the bond program in line with the debt management strategy, and in response to the evolving fiscal outlook. In the Fall Economic Statement 2022, the government announced that it would no longer issue Real Return Bonds due to low demand for the product. The cessation of issuance in this sector would allow the government to promote liquidity in core funding sectors. During 2022-23, $0.7 billion of Real Return Bonds were issued up until the second quarter of the fiscal year, when issuance ceased.

Earlier in the year, as a result of the improving fiscal outlook, the projected deficit declined, leading to a reduction in projected borrowing needs. As a result, in June 2022, the government announced its decision to cancel the issuance of a planned ultra-long bond which would have matured in December 2064.

Ukraine Sovereignty Bond

On November 29, 2022, Canada issued a $500 million Ukraine Sovereignty Bond to provide financial assistance to the government and the people of Ukraine.^{Footnote 2} Equivalent proceeds from the bond issuance were channeled into a loan via the IMF Administered Account.

Borrowing Authority Act

During the 2022-23 fiscal year, the Borrowing Authority Act (BAA) was amended to cause the approximately $8.4 billion borrowed between March 23, 2021 and May 6, 2021 under paragraph 46.1(c) of the Financial Administration Act (FAA) to be treated as conventional borrowings for the purpose of the maximum amount set out under the BAA.

Budget 2022 announced the government's intent to introduce legislation to treat these extraordinary borrowings as regular borrowings which in turn would lead them to be counted against the maximum amount set out under section 4 of the BAA. On June 23, 2022, the Act was amended to this effect, with consequential amendments being made to the FAA to no longer treat this amount as extraordinary borrowings for the purpose of legislative reporting requirements under the FAA. The amounts will be reported as at the fiscal year-end in the annual Debt Management Report.

Federal Green Bond Program

In March 2023, the government released its inaugural allocation report for the green bond program. This report detailed how the proceeds raised by the bond program were allocated to programs with environmental impacts across a variety of priorities. The release of this report fulfills the allocation reporting and verification requirements set out in the Green Bond Framework.

During the fiscal year, no additional green bonds were issued as the government actively monitors developments, and the evolving market standards and investor preferences in the green bond space. The government remains committed to regular green bond issuances.

Stock of Domestic Market Debt

The stock of domestic market debt increased by $15.3 billion in 2022-23, bringing the total debt stock to $1,259.9 billion. The change in the stock was comprised of a $12.0 billion increase in treasury and cash management bills, a $1.8 billion increase in marketable bonds payable in Canadian dollars, and a $1.5 billion increase in marketable debt payable in foreign currencies. Notwithstanding the increase in debt stock, Canada's general government gross debt-to-GDP (gross domestic product) ratio was among the lowest in the Group of Seven (G7) nations, according to the International Monetary Fund (IMF).

In 2022-23, as interest rates rose from a low level in the two previous fiscal years, the weighted average rate of interest on market debt increased to 2.28 per cent compared to 1.37 per cent in 2021-22.

Strong Demand for Government of Canada Debt Securities

In 2022-23, the relative strength of the Canadian economy and its capital markets continued to support demand for Government of Canada securities in primary and secondary markets. Accordingly, treasury bill and bond auctions remained well-covered and competitively bid, providing an efficient manner for the government to raise funding. The publication of the Quarterly Bond Schedule before each quarter and the Call for Tenders before each auction helped maintain transparency. This promoted well-functioning markets for the government's securities to the benefit of a wide array of domestic market participants, contributing to the objective of raising stable and low-cost funding.

Part I: 2022-23 Debt Management Context

Composition of Federal Debt

In 2022-23, total market debt increased by $15.3 billion to $1,259.9 billion (see Table 1). For additional information on the financial position of the government, see the 2022-23 Annual Financial Report of the Government of Canada.

Sources of Borrowings and Uses of Borrowings

The key reference point for debt management is the financial requirement or financial source, which represents the net cash outflow or inflow for the fiscal year. This measure differs from the budgetary balance (i.e., the deficit or surplus on an accrual basis) by the amount of non-budgetary transactions and the timing of payments on a cash basis, which can be significant. Non-budgetary transactions include changes in federal employee pension liabilities; changes in non-financial assets; investing activities through loans, investments and advances; and changes in other financial assets and liabilities, including foreign exchange activities. Anticipated borrowing and planned uses of borrowings are set out in the Debt Management Strategy, while actual borrowing and uses of borrowings compared to those forecasted are reported in this publication (see Table 2).

There was a financial requirement of $66.2 billion in 2022-23, reflecting $35.3 billion in cash outflows due to a budgetary deficit and a cash outflow of $30.9 billion due to non-budgetary transactions. The financial requirement was $18.8 billion lower than the projection in the Debt Management Strategy for 2022-23. For comparison, the financial requirement in 2021-22 was $84.4 billion.

In 2022-23, loans to the Business Development Bank of Canada, Canada Mortgage and Housing Corporation and Farm Credit Canada under the Crown Borrowing Program were $86.9 billion, $5.1 billion higher than planned in the Debt Management Strategy for 2022-23.

Borrowing Authorities

In order to undertake market borrowing activities, the Minister needs authority from Parliament as well as the Governor in Council (the "GIC").

Under the Parliamentary borrowing authority framework enacted on November 23, 2017, Parliamentary authority is granted through the Borrowing Authority Act (BAA) and Part IV of the Financial Administration Act (FAA), which together allow the Minister to borrow money up to a maximum overall amount as approved by Parliament. The FAA also authorizes the Minister to borrow in excess of the approved maximum amount under limited circumstances for the specific purposes of refinancing outstanding debt, extinguishing or reducing liabilities, and making payments in extraordinary circumstances, such as natural disasters.

Subject to the noted limited exceptions, the maximum stock of borrowings approved by Parliament in effect from May 6, 2021 was $1,831 billion, which also includes amounts borrowed by agent Crown corporations, and Canada Mortgage Bonds guaranteed by Canada Mortgage and Housing Corporation. Following an amendment to the BAA in June 2022 when the Budget Implementation Act, 2022 received Royal Assent, extraordinary borrowings raised under paragraph 46.1(c) of the FAA between March 23, 2021 and May 6, 2021 will be counted against the maximum stock of borrowings. As at March 31, 2023, the outstanding borrowings subject to the maximum amount was $1,574 billion ($1,529 billion as at March 31, 2022).

Part IV of the FAA also requires the Minister to receive annual approval from the GIC to carry out borrowing for the Government of Canada for each fiscal year, including issuing securities in financial markets and undertaking related activities subject to a maximum aggregate amount. On the recommendation of the Minister, the GIC approved $513.3 billion to be the maximum aggregate principal amount of money that may be borrowed by the Minister in 2022-23.^{Footnote 3} The maximum aggregate principal amount is the sum of the following sub-components:
(i) the maximum stock of treasury bills anticipated to be outstanding during the year; (ii) the total value of refinanced and anticipated new issuances of marketable bonds; and (iii) amounts to facilitate intra-year management of the debt and foreign exchange accounts.

During 2022-23, $394.5 billion of the GIC-approved borrowing authority was used, $118.8 billion below the authorized borrowing authority limit (see Table 2).

Government of Canada Credit Rating Profile

Throughout 2022-23, the Government of Canada continued to benefit from high credit ratings from rating agencies, with a stable outlook, on Canadian-dollar and foreign-currency-denominated short- and long-term debt (see Table 3).

The rating agencies focusing on general government net debt-to-GDP have indicated that Canada's sound macroeconomic policy framework and financial system, as well as Canada's economic resilience and diversity and the strength of monetary and fiscal flexibility, are all reflected in Canada's strong current credit ratings: Moody's (Aaa), Fitch (AA+), S&P (AAA), DBRS (AAA) and JCRA (AAA).

Part II: Report on Objectives, Strategic Direction and Principles

Objectives, Strategic Direction and Principles

Objectives

The debt management objectives in 2022-23 were to raise stable and low-cost funding to meet the financial needs of the Government of Canada and to maintain a well-functioning market for Government of Canada securities.

Strategic Direction

During the past two fiscal years, the government maintained its long-term emphasis in the debt management strategy to manage the significant increase in debt resulting from the response to COVID-19. The government closely monitors financial markets and adjusts issuance if necessary to appropriately and prudently respond to shifts in market demand and changes to financial requirements. During 2022-23, in response to an improved fiscal position and declining borrowing needs, the government reduced its borrowing program, and announced its decision to cancel the issuance of its ultra-long bond. In response to low market demand, the government also ceased issuance of Real Return Bonds during the fiscal year, allowing the government to promote liquidity by consolidating funding within its core funding sectors.

Principles

In support of the objectives and strategic direction, the design and implementation of the domestic debt program are guided by the key principles of transparency, regularity, prudence and liquidity. Towards this end, the government publishes strategies and plans, and consults regularly with market participants to ensure the integrity and attractiveness of the market for dealers and investors. The structure of the market debt is managed conservatively in a cost-risk framework, preserving access to diversified sources of funding and supporting a broad investor base.

Raising Stable and Low-Cost Funding

In general, achieving stable and low-cost funding involves striking a balance between debt costs and various risks in the debt structure. This selected balance between cost and risk is mostly achieved through the deliberate allocation of issuance among various debt instruments and terms.

Market Debt Issuance in 2022-23

In 2022-23, total bond issuance was $185.2 billion, down from $257.4 billion in 2021-22, reflecting lower financial requirements. As a result, issuance in both long and short sectors was lower. Issuance of short-term debt instruments (2-, 3- and 5-year sectors) decreased to $118.0 billion in 2022-23 from $140.0 billion in 2021-22. On a percentage basis, the share of bond issuance made up by short-term bonds increased to 64 per cent in 2022-23, up from 54 per cent in 2021-22 (see Table 4.2).

The allocation of long bond issuance (i.e., 10-year maturities and longer) was 36 per cent in 2022-23, 8 percentage points lower than the previous fiscal year, when it was 44 per cent (see Table 4.2) and 1 percentage point higher than the plan set out in the Debt Management Strategy for 2022-23 (see Table 4.3).Issuanceacross all tenors was lower than expected as the financial requirement came in $18.8 billion lower than projected.

Market Debt Composition

The composition of the stock of market debt is a reflection of past debt issuance choices (e.g., over the last 30 years for the 30-year sector). The effects of changes in issuance patterns of short-term debt instruments become visible relatively quickly, while the full effect of issuance changes in longer-term debt instruments takes the entire maturity period to be fully appreciated. A well-distributed maturity profile helps maintain a prudent risk exposure to changes in interest rates over time at an affordable cost, while promoting well-functioning markets by providing liquidity across different maturity sectors.

Composition of Market Debt by Remaining Term to Maturity

As a result of the significant increase in long-term bond issuance during 2020-21 and 2021-22, the composition of market debt made up by long-term debt stock continued to grow in 2022-23 even as the proportion of long-term issuance decreased. This is as a result of the short-term portion of the increased issuances of the previous two fiscal years coming up for maturity, while the long debt issued in the same period will not mature for some years. Correspondingly, the proportion of short-term bonds declined (see Chart 2).

Cost of Market Debt

Annual interest rate costs on market debt are the largest component of public debt charges (which also include interest expenses on non-market liabilities).^{Footnote 4} The weighted average rate of interest on the stock of market debt was 2.28 per cent in 2022-23, up from 1.37 per cent in 2021-22. Interest on market debt as a share of total government expenses increased from 3.35 per cent in 2021-22 to 5.95 per cent in 2022-23 (see Chart 3). This was primarily due to a higher cost of borrowing which was most evident in the treasury bills sector given the high rollover.

Market Debt: Average Term to Maturity and Debt Rollover

Prudent management of debt refinancing needs, which promotes investor confidence, involves Government of Canada actions that strive to minimize the impact of market volatility or disruptions to the funding program. According to a number of common measures of market debt refinancing risks, including average term to maturity (ATM) and debt rollover, the Government of Canada's market debt remained prudent through 2022-23 when compared to historical averages.

Average Term to Maturity

The ATM of market debt tends to rise and fall mostly with the stock of treasury bills. In 2022-23, the ATM increased to 6.9 years, up from 6.6 years in 2021-22, reflecting the Government of Canada's strategic direction to maximize long-term issuance in the previous two fiscal years (see Chart 4.1).

The weighted ATM is measured by weighting the remaining term to maturity of issued debt by its proportion to the overall debt stock.^{Footnote 5}

Canada has successfully built a prudent debt structure relative to GDP over the last 30 years. In general, low debt-to-GDP countries can choose a higher risk level (i.e., lower ATM) in exchange for lower interest rate costs. Overall, Canada is in line with other AAA-rated countries (see Chart 4.2).

Debt Rollover: Quarterly Maturities to GDP

Debt rollover, measured as the amount of debt maturing per quarter as a percentage of GDP, decreased to an average of 5.2 per cent in 2022-23 from an average of 5.8 per cent in 2021-22 (see Chart 5). This decrease reflects a slight decline in the amount of debt maturing as well as an increase in GDP. The average annual debt rollover in 2022-23 is relatively in line with the average over the previous decade of 5.6 per cent.

Debt Rollover: Single-Day Maturities

The government maintained 10 maturity dates in 2022-23, which was the same as in 2021-22. Following the significant increase in debt which began in 2020-21, single-day maturities remain high relative to historical averages. The government monitors the level of single-day maturities and may implement programs to effectively manage Government of Canada cash flows ahead of large debt maturities.

The benchmark maturity date profile is as follows:

• 2-year bonds: February 1, May 1, August 1, November 1
• 3-year bonds: April 1, October 1
• 5-year bonds: March 1, September 1
• 10-year bonds: June 1, December 1
• 30-year bonds: December 1 – although Real Return Bonds and nominal 30-year bonds mature on December 1, they do not mature in the same year.

Maintaining a Well-Functioning Government Securities Market

A well-functioning market in Government of Canada securities benefits the government as a borrower as it directly supports the fundamental objective of raising stable, low-cost funding, while also benefiting a wide range of market participants.

A well-functioning market helps the government to have more certain access to funding markets over time, contributes to lower and less volatile interest rate costs for the government, and provides flexibility to meet changing financial requirements. For market participants, a liquid and transparent secondary market in government debt instruments provides risk-free assets for investment portfolios, stability to other domestic fixed-income markets for which Government of Canada securities serve as benchmarks (e.g., provinces, municipalities and corporations), and a useful tool for hedging interest rate risk.

Providing Regular and Transparent Issuance

During 2022-23, the Government of Canada continued announcing bond auction schedules prior to the start of each quarter, and provided details for each operation in a Call for Tender in the week leading up to an auction.^{Footnote 6} In 2022-23, there were regular auctions for 2-, 3-, 5-, 10- and 30-year bonds. There were also auctions for Real Return Bonds prior to being canceled. To promote transparency in the market for Government of Canada securities, the Bank of Canada published bond issuance schedules as well as benchmark details ahead of each fiscal quarter within its Quarterly Bond Schedule publications available on the Bank website.

Concentrating on Key Benchmarks

All benchmark bonds in 2022-23 continued to reach or exceed minimum benchmark size targets (see Chart 6).^{Footnote 7} Compared to 2021-22, the benchmark target sizes for all sectors were reduced due to lower borrowing needs, with the greatest reduction in the 10- and 30-year sectors.

• 2-year bonds: $14 billion to $18 billion
• 3-year bonds: $8 billion to $12 billion
• 5-year bonds: $14 billion to $18 billion
• 10-year bonds: $18 billion to $24 billion
• 30-year nominal bonds: $25 billion to $40 billion

Ensuring a Broad Investor Base in Government of Canada Securities

A diversified investor base supports an active secondary market for Government of Canada securities, thereby helping to keep funding costs low and stable. Diversification of the investor base is pursued by maintaining a domestic debt program that issues securities in a wide range of maturity sectors, which meet the needs of different investor types.

During 2022-23, domestic investors (including the Bank of Canada) held about 71 per cent of Government of Canada securities (see Chart 7). Among domestic investors, the Bank of Canada held the largest share of Government of Canada securities (26 per cent), followed by insurance companies and pension funds (16 per cent). Taken together, these top two categories accounted for just under half of outstanding Government of Canada securities.

In 2022-23, non-resident investors held 29 per cent of Government of Canada securities,^{Footnote 8} similar to 2021-22. This share of non-resident holdings of government securities remains below the average G7 holdings by non-resident investors (see Chart 8).

Consulting With Market Participants

Formal consultations with market participants are held at least once a year, in order to obtain their views on the design of the borrowing program and on the liquidity and efficiency of the Government of Canada's securities markets. These consultations helped to inform the Debt Strategy Management Strategy for 2022-23.

During the consultations held in October of 2021, the Department of Finance Canada and the Bank of Canada conducted over 30 bilateral virtual meetings with dealers, investors and other relevant market participants. These consultations sought the views of market participants on issues related to the design and operation of the Government of Canada's domestic debt program.

During the fall 2021 consultations, a broad consensus supported keeping treasury bill issuance relatively unchanged even as borrowing needs were expected to decline in 2022-23. Participants however expressed support for reducing long bond issuance. Market participants also broadly supported the termination of ultra-long bonds and the 3-year sector, which they did not consider a useful benchmark. More details on these discussions are available in the Fall 2021 Debt Management Strategy Consultations Summary, published on the Bank of Canada website on December 14, 2021.^{Footnote 9}

Securities Distribution System

As the government's fiscal agent, the Bank of Canada distributes Government of Canada marketable bills and bonds by auction to government securities distributors (GSDs) and customers. GSDs that maintain a certain threshold of activity in the primary and secondary markets for Government of Canada securities may become primary dealers, which form a select core group of distributors for Government of Canada securities. To maintain a well-functioning securities distribution system, government securities auctions are monitored to ensure that GSDs abide by the terms and conditions.^{Footnote 10}

Quick turnaround times enhance the efficiency of auctions and reduce market risk for participants. In 2022-23, the turnaround time for treasury bill and bond auctions averaged 48 seconds, while there were no buyback operations conducted. This compares to an average turnaround time in 2021-22 of 1 minute 58 seconds. ^{Footnote 11} This improvement was a result of the Bank's upgrade of the system used to conduct auctions.

Monitoring Secondary Market Trading in Government of Canada Securities

Two important measures of liquidity and efficiency in the secondary market for Government of Canada securities are trading volume and turnover ratio.

Trading volume represents the amount of securities traded during a specific period (e.g., daily). Large trading volumes typically indicate that participants can buy or sell in the marketplace without a substantial impact on the price of the securities and generally imply lower bid-offer spreads.

The average daily trading volume in the secondary market for Government of Canada's bonds during 2022-23 was $42.4 billion, up $3.0 billion from 2021-22 (see Chart 9), bringing trading volume above its pre-pandemic level.

Turnover ratio, which is the ratio of securities traded relative to the amount of securities outstanding, measures market depth. High turnover implies that a large proportion of securities change hands for a given amount available in the market, which is an indication of a liquid market.

In 2022-23, the annual debt stock turnover ratio in the Government of Canada secondary bond market, calculated as trading volume divided by average debt stock, decreased slightly to 10.6x from 10.9x in 2021-22. The sectors with the highest monthly turnover during the fiscal year were medium-term bonds with maturities between 3 and 10 years at 12.7x, while Real Return Bonds had the lowest turnover at 0.4x (see Chart 10).

Supporting Secondary Market Liquidity

The Bank of Canada operates securities repo operations (SROs) whereby it makes a portion of its holdings of Government of Canada securities available through daily repurchase operations.^{Footnote 12} This provides a temporary source of Government of Canada nominal bonds and treasury bills to primary dealers to support liquidity in the securities financing market. The Bank of Canada conducted 7,609 SROs in 2022-23, compared to 10,900 SROs in 2021-22.

Regular Bond Buyback Program

Bond buyback operations on a cash basis and on a switch basis involve the purchase of bonds with a remaining term to maturity of 12 months to 25 years. Bond buyback operations on a cash basis involve the exchange of a bond for cash. Bond buyback operations on a switch basis, on the other hand, involve the exchange of one bond for another (e.g., an off-the-run bond for the building-to-benchmark bond), on a duration-neutral basis.^{Footnote 13}

There were no regular bond buybacks on a cash or switch basis in 2022-23.