Annex 3
Debt Management Strategy for 2020-21

Canada’s Debt in Context

The Government of Canada has increased its borrowing in order to make the necessary temporary investments to stabilize the Canadian economy amidst the extraordinary circumstances of the COVID-19 pandemic. The current environment provides a unique opportunity for the government to issue an unprecedented level of long-term bonds at historically low interest rates. This will ensure Canada’s debt remains affordable and is less vulnerable to increases in interest rates for future generations. Despite an increased deficit for 2020-21, public debt charges are expected to decline, and the country is retaining its low-debt advantage (Chart A3.1). As noted in Annex 2, Canada’s public debt charges are expected to be more than $4 billion lower this year compared to the forecast in the 2019 Economic and Fiscal Update.

Chart A3.1
Federal Debt and Public Debt Charges
Chart A3.1 - Federal Debt and Public Debt Charges

Sources: Fiscal Reference Tables; Finance Canada calculations

  • Text version
    Federal Debt (left scale) Public Debt Charges (right scale) Federal Debt (left scale) Public Debt Charges (right scale)
    1994 66.4 5.6
    1995 66.8 6.0
    1996 65.7 5.5
    1997 61.9 4.8
    1998 59.1 4.6
    1999 53.7 4.3
    2000 47.2 4.0
    2001 44.7 3.5
    2002 42.3 3.1
    2003 39.5 2.9
    2004 37.0 2.6
    2005 33.9 2.4
    2006 31.2 2.3
    2007 29.0 2.1
    2008 28.2 1.7
    2009 33.4 1.7
    2010 33.4 1.7
    2011 33.4 1.6
    2012 34.0 1.4
    2013 32.9 1.3
    2014 31.5 1.2
    2015 31.9 1.1
    2016 32.1 1.0
    2017 31.3 1.0
    2018 30.8 1.0 30.8 1.0
    2019 31.1 1.1
    2020 49.1 0.9

Maintaining Canada’s low debt advantage

Entering into the crisis, Canada had the lowest net debt-to-GDP (gross domestic product) ratio among the Group of Seven (G7) countries, reflecting significant holdings of financial assets. Due to temporary COVID-19 related spending, the federal debt-to-GDP ratio is expected to rise from 31 per cent in 2019-20 to 49 per cent in 2020-21. Even with this adjustment, Canada is expected to maintain its low-debt advantage.

Chart A3.2
G7 General Government Net Debt, 2019 and 2020
Chart A3.2 - G7 General Government Net Debt, 2019 and 2020

Sources: IMF Fiscal Monitor (April 2020); Finance Canada calculations.

  • Text version
    2019 Net Debt 2020 Net Debt
    Canada 26 15
    Germany 41 8
    United Kingdom 75 10
    G7 average 85 15
    France 90 17
    United States 84 23
    Italy 123 20
    Japan 154 15

In addition, Canada has a diversified investor base that promotes more certainty of access to funding markets over time, contributes to lower and less volatile yields for government securities, and provides flexibility to meet changing financial requirements. Canadian investors, such as insurance companies, pension funds and financial institutions, hold more than two-thirds of outstanding Government of Canada securities, which helps provide a buffer against potential fluctuations in foreign demand. In addition, Canada has a balanced portfolio of debt instruments with a wide range of maturities. This helps meet the needs of many different types of investors and provides the government more funding options.

In pursuing a historic level of issuance in long-term bonds, the government will consult over the coming months with market participants to assess the market’s capacity for long-term debt. Reflecting feedback from our primary dealers and other market participants, the government will make adjustments as warranted to maintain stability in Canada’s fixed-income markets in these evolving circumstances, taking into account the requirements of other issuers, such as provinces, municipalities and corporations.

Chart A3.3
Distribution of Government of Canada Securities
For details, see text version.

Source: Statistics Canada, as of April 2020.

Percentage of Market Debt to GDP Set to Mature
For details, see text version.

Source: Bloomberg, as of June 26, 2020.

  • Text version - Distribution of Government of Canada Securities
      Domestic holdings Non-Resident holdings Domestic holdings (percentage of nominal outstanding)
    April 2014 452.26 192.33 70.16
    May 2014 476.93 174.24 73.24
    June 2014 474.81 165.87 74.11
    July 2014 483.20 163.84 74.68
    August 2014 476.25 165.28 74.24
    September 2014 473.77 165.11 74.16
    October 2014 468.07 171.30 73.21
    November 2014 469.72 170.11 73.41
    December 2014 468.83 164.36 74.04
    January 2015 481.79 162.23 74.81
    February 2015 463.75 170.73 73.09
    March 2015 459.68 174.34 72.50
    April 2015 449.05 193.32 69.91
    May 2015 455.10 192.32 70.29
    June 2015 444.39 194.16 69.59
    July 2015 459.93 195.02 70.22
    August 2015 453.15 198.90 69.50
    September 2015 457.68 196.84 69.93
    October 2015 453.25 204.97 68.86
    November 2015 456.30 206.53 68.84
    December 2015 456.21 199.82 69.54
    January 2016 464.17 201.82 69.70
    February 2016 452.11 206.41 68.66
    March 2016 455.15 199.14 69.56
    April 2016 457.48 209.96 68.54
    May 2016 455.63 220.26 67.41
    June 2016 457.10 212.30 68.28
    July 2016 463.75 215.98 68.23
    August 2016 457.63 219.55 67.58
    September 2016 457.01 219.63 67.54
    October 2016 458.45 221.06 67.47
    November 2016 457.18 222.94 67.22
    December 2016 457.16 221.69 67.34
    January 2017 469.06 213.72 68.70
    February 2017 470.91 210.67 69.09
    March 2017 467.98 210.53 68.97
    April 2017 468.77 221.44 67.92
    May 2017 467.67 231.66 66.87
    June 2017 481.06 220.59 68.56
    July 2017 474.73 224.13 67.93
    August 2017 469.66 226.53 67.46
    September 2017 462.74 232.41 66.57
    October 2017 461.33 237.90 65.98
    November 2017 451.14 247.20 64.60
    December 2017 453.31 244.81 64.93
    January 2018 457.01 241.59 65.42
    February 2018 470.52 230.99 67.07
    March 2018 472.16 217.75 68.44
    April 2018 487.73 211.37 69.77
    May 2018 490.48 212.61 69.76
    June 2018 482.65 212.31 69.45
    July 2018 486.58 216.14 69.24
    August 2018 490.67 213.24 69.71
    September 2018 486.10 212.56 69.58
    October 2018 495.66 215.02 69.74
    November 2018 485.62 220.18 68.80
    December 2018 492.17 213.16 69.78
    January 2019 490.99 223.23 68.75
    February 2019 484.34 222.06 68.56
    March 2019 490.27 215.63 69.45
    April 2019 500.95 215.96 69.88
    May 2019 498.12 223.44 69.03
    June 2019 499.35 213.63 70.04
    July 2019 522.20 202.83 72.02
    August 2019 524.92 203.49 72.06
    September 2019 517.54 200.44 72.08
    October 2019 529.73 202.09 72.39
    November 2019 517.22 206.91 71.43
    December 2019 517.00 202.78 71.83
    January 2020 519.75 204.90 71.72
    February 2020 514.38 218.83 70.16
    March 2020 532.28 216.91 71.05
    April 2020 643.45 241.85 72.68
  • Text version - Percentage of Market Debt to GDP Set to Mature
    Canada Germany United States United Kingdom France Japan Italy
    Within 1 year 22% 6% 32% 8% 15% 47% 19%
    Within 5 years 36% 16% 63% 24% 40% 103% 70%
    Within 10 years 41% 27% 77% 35% 63% 144% 95%

The 2020-21 Debt Management Strategy sets out the Government of Canada's objectives, strategy and borrowing plans for its domestic debt program and the management of its official international reserves. Borrowing activities support the ongoing refinancing of government debt coming to maturity, the execution of planned spending measures and the financial operations of the government. The 2020-21 Debt Management Strategy reflects fiscal projections in the 2020 Economic and Fiscal Snapshot.

The Financial Administration Act (FAA) requires that the Minister of Finance table a report on the anticipated borrowing to be undertaken in the fiscal year ahead, including the purposes for which the money will be borrowed and the management of the public debt generally, in each House of Parliament, no later than 30 sitting days after the beginning of the fiscal year. The 2020-21 Debt Management Strategy fulfills this requirement.

Objectives

The fundamental objectives of debt management are to raise stable and low-cost funding to meet the financial requirements of the Government of Canada and to maintain a well-functioning market for Government of Canada securities.

Achieving stable and low-cost funding involves striking a balance between the cost and risk associated with the debt structure as funding needs and market conditions vary. Having access to a well-functioning government securities market contributes to lower costs and less volatile pricing for the government, ensuring that funds can be raised efficiently and flexibly over time to meet the government’s financial requirements. Moreover, to support a liquid and well-functioning market for Government of Canada securities, the government strives to promote transparency and consistency.

With this Debt Management Strategy, the government intends to issue a historic level of long-term bonds to manage the significant increase in debt resulting from the response to COVID-19. In light of the unique situation posed by the COVID-19 crisis, the government will continue to review the Debt Management Strategy for opportunities to borrow at longer maturities and lock in historically low interest rates, as well as enhance the predictability of debt servicing costs. Future decisions will be guided by the need to maintain liquid and well-functioning markets for Government of Canada securities, taking into consideration the requirements of other market participants such as the borrowing needs of provincial governments. More information on the government’s long-term approach will be shared in the fall.

Outlook for Government of Canada Debt

To address the current economic challenges, the Government of Canada has taken immediate action to help Canadians facing hardship as a result of the COVID-19 outbreak. As such, this temporary increase in new borrowing will be undertaken in 2020-21 to finance the government’s COVID-19 Economic Response Plan.

The government is well-positioned to support Canadians and the Canadian economy to meet funding challenges in response to the COVID-19 pandemic. Entering into the crisis, Canada had the lowest net debt-to-GDP (gross domestic product) ratio among the Group of Seven (G7) countries, reflecting significant holdings of financial assets. Due to COVID-19 related spending, the federal debt-to-GDP ratio is expected to rise from 31 per cent in 2019-20 to 49 per cent in 2020-21. Even with this adjustment, Canada is expected to maintain its low-debt advantage.

In addition, given higher borrowing requirements, the government is taking a prudent approach by issuing an unprecedented level of long-term bonds in order to lock in funding at historically low interest rates. This will ensure Canada’s debt remains affordable and sustainable for future generations and will help retain our low-debt advantage.

Canada remains among the top rated countries in the G7 and continues to hold a AAA rating, with a stable outlook, from all major credit rating agencies except Fitch. Rating agencies indicate that Canada's strong credit ratings are supported by its economic and institutional strengths, well-capitalized and developed financial markets, and monetary and fiscal buffers, which underpin its resilience to economic shocks such as COVID-19. They also note that the country’s effective, stable and predictable policy-making contributes to steady demand from long-term investors.

Highlights of the Government of Canada’s Debt Management Strategy 2020-21

Debt Structure Planning

In developing its debt strategy, the government seeks to strike a balance between keeping funding costs low, mitigating rollover risk and supporting well-functioning markets. With this Debt Management Strategy, the government also intends to issue a historic level of long-term bonds to manage the significant increase in debt resulting from the response to COVID-19.

Analytical Framework

The government sets its debt issuance plan using a balanced portfolio of instruments with different maturities with the goal of meeting its objectives over a medium-term horizon under a wide range of economic and interest rate scenarios and projections. In selecting maturities, the benefits of reducing rollover risk are assessed against the marginal costs of issuing more long-term bonds, as yields are typically higher at longer terms. In an upward sloping yield curve environment, as the maturity of debt issuance is extended relative to the 3-month treasury bill, the marginal cost of debt increases while the marginal reduction in rollover risk declines, particularly beyond the 5-year sector (Chart A3.4).

Chart A3.4
Cost-Risk Trade-off for $100 billion Notional Amount of Stock of Debt per Sectors
For details, see text version.

Source: Yield forecast based on Department of Finance May 2020 survey of private sector economists.

For details, see text version.

Source: Bloomberg.

  • Text version - Left
    Maturity Quarterly Rollover for Notional $100B of Debt Average Forecasted Yields 2020-2021 Reduction in rollover
    3 months $ 100 0.25
    6 months $ 50 0.32 50%
    12 months $ 25 0.38 75%
    2 years $ 13 0.43 88%
    3 years $ 8 0.46 92%
    5 years $ 5 0.54 95%
    10 years $ 3 0.71 98%
    30 years $ 1 1.12 99%
  • Text version - Right
    Year 10-year yield on Government of Canada bonds
    1990 10.736
    1991 9.471
    1992 8.093
    1993 7.242
    1994 8.388
    1995 8.164
    1996 7.233
    1997 6.145
    1998 5.288
    1999 5.554
    2000 5.933
    2001 5.477
    2002 5.298
    2003 4.812
    2004 4.584
    2005 4.069
    2006 4.213
    2007 4.276
    2008 3.608
    2009 3.237
    2010 3.236
    2011 2.777
    2012 1.874
    2013 2.264
    2014 2.234
    2015 1.525
    2016 1.255
    2017 1.786
    2018 2.282
    2019 1.592
    2020 0.53

Prior Market Consultations

Market participants and experts are also consulted as part of the process of developing the debt management strategy. In light of the evolving environment and risks given the COVID-19 pandemic, the government will continue to consult market participants and experts regularly as it pursues this historic increase in long-term bonds and will make appropriate adjustments to its debt management strategy, if warranted, to maintain well-functioning markets for the benefit of all Canadians.

During the October 2019 consultations, the majority of market participants and experts commented that the market for Government of Canada securities were generally well-functioning and that there remains a strong demand for Canadian debt. A summary of the October 2019 consultations can be found at the following link: https://www.bankofcanada.ca/wp-content/uploads/2020/03/consultations-summary-dms-2020-21.pdf.

Borrowing Authority

The authority to manage public debt flows from the Borrowing Authority Act (BAA) and Part IV of the FAA, which together allow the Minister of Finance to borrow money up to a maximum amount as approved by Parliament, subject to certain exceptions including borrowing in extraordinary circumstances. Parliament granted its approval of a maximum stock of outstanding government and agent Crown corporation market debt of $1,168 billion via the BAA, which came into force on November 23, 2017. Under section 8 of the BAA, the Minister must table a report in Parliament on the government’s and agent Crown corporations’ borrowings, including the Minister’s assessment of whether the maximum amount should be increased or decreased, by November 23, 2020 (i.e. every three fiscal years).

On March 25, 2020, Bill C-13, the COVID-19 Emergency Response Act, received Royal Assent, enabling the rapid implementation and administration of measures to protect Canadians’ health and safety and stabilize the Canadian economy. The COVID-19 Emergency Response Act enacted section 47 of the FAA. Under the authority of section 47 of the FAA, the Minister of Finance financed the financial requirements resulting from the extraordinary circumstances of the COVID-19 outbreak. The FAA requires the Minister to table a report in Parliament within the first 30 sitting days of each respective House following the first day of such borrowings.

Planned Borrowing Activities for 2020-21

The projected sources and uses of borrowings for 2020-21 are presented in Table A3.1. Actual sources and uses of borrowings compared with the projections will be reported in the Debt Management Report for 2020-21, and detailed accounting information on the government’s interest-bearing debt will be provided in the Public Accounts of Canada 2021.

Sources of Borrowings

The aggregate principal amount of money to be borrowed by the government in 2020-21 is projected to be $713 billion. The size of the program reflects significant additional financial requirements as a result of government initiatives to respond to the COVID-19 pandemic. All borrowings will be sourced from domestic and foreign wholesale markets (Table A3.1).

Uses of Borrowings

The government’s borrowing needs are driven by the refinancing of debt and projected financial requirements, which are principally related to COVID-19.

In 2020-21, the refinancing of debt is projected to be $245 billion, and the financial requirement is expected to be $469 billion. The government’s cash balances are not expected to change as new borrowings are expected to meet all financing requirements.

Financial requirement projections include measures under the COVID-19 Economic Response Plan (the Plan). The Plan includes more than $211 billion in direct support measures to Canadian workers and businesses and an additional $85 billion in tax and customs duty payment deferrals to meet liquidity needs of businesses and households to help stabilize the economy. Chapter 2 of this report (2020 Economic and Fiscal Snapshot) provides more information on the Plan.

Actual borrowings for the year may differ due to uncertainty associated with economic and fiscal projections, the timing of cash transactions, and other factors such as changes in foreign reserve needs and Crown corporation borrowings. To adjust for unexpected changes in financial requirements, debt issuance can be altered during the year, typically through changes in the issuance of treasury bills.

Table A3.1
Planned/Actual Sources and Uses of Borrowings for Fiscal Year 2020-21
billions of dollars
Sources of borrowings  
  Payable in Canadian currency  
    Treasury bills1 294
    Bonds 409
  Total payable in Canadian currency 703
  Payable in foreign currencies 10
Total sources of borrowings 713
Uses of borrowings  
Refinancing needs  
  Payable in Canadian currency  
    Treasury bills 152
    Bonds 92
    Of which:  
      Bonds that mature 92
      Switch bond buybacks  -
      Cash management bond buybacks  -
    Retail debt 0
  Total payable in Canadian currency 244
  Payable in foreign currencies 1
Total refinancing needs 245
Financial requirements  
  Budgetary balance 343
  Non-budgetary transactions  
    Pension and other accounts -15
    Non-financial assets 5
    Loans, investments and advances 139
    Of which:  
      Loans to enterprise Crown corporations 48
      Insured Mortgage Purchase Program 51
      Other 41
    Other transactions2 -4
  Total non-budgetary transactions 126
Total financial requirements 469
Total Uses of borrowings 713
Change in other unmatured debt transactions3 0
Net increase or decrease (-) in cash 0
Sources: Department of Finance calculations
Notes: Numbers may not add due to rounding. In the uses of borrowings section, a negative sign denotes a financial source.
1   Treasury bills are rolled over, or refinanced, a number of times during the year. This results in a larger number of new issues per year than the stock of outstanding at the end of the fiscal year, which is presented in the table.
2   Other transactions primarily comprise the conversion of accrual transactions to cash inflows and outflows for taxes and other accounts receivable, provincial and territorial tax collection agreements, amounts payable to taxpayers and other liabilities, and foreign exchange accounts.
3   Includes cross-currency swap revaluation, unamortized discounts on debt issues, obligations related to capital leases and other unmatured debt, where this refers to in the table.

2020-21 Borrowing Program

Given higher financial requirements related to COVID-19, the government is increasing its debt issuance in all core sectors, including an unprecedented amount in long-term bonds. The aggregate principal amount to be borrowed in 2020-21 is $713 billion, which is $437 billion higher than the issuance for 2019-20, and the total stock of market debt is projected to reach $1,236 billion by the end of 2020-21 (Table A3.2). Issuance in the treasury bill sector can be adjusted effectively to address unexpected changes in financial requirements.

Table A3.2 
Change in Composition of Market Debt
billions of dollars, end of fiscal year
  2016-17
Actual
2017-18
Actual
2018-19
Actual
2019-20
Actual
2020-21
Projected
Domestic bonds1 536 576 569 597 915
Treasury bills 137 111 134 152 294
Foreign debt 18 16 16 16 26
Retail debt 5 3 1 1 1
Total market debt 695 705 721 765 1,236
Sources: Bank of Canada; Department of Finance calculations
Note: numbers may not add due to rounding.
1   Includes additional debt that accrues during the fiscal year as a result of the inflation adjustments to Real Return Bonds.

Treasury Bill Program

Due to higher borrowing requirements, issuance of 3-, 6- and 12-month maturities have been moved to a weekly frequency, with auction sizes projected to be largely in the $10 billion to $35 billion range. The government plans to continue to conduct treasury bill auctions on a weekly basis for the remainder of the fiscal year.

To mitigate debt rollover and respond to market demand for longer dated treasury bills, a higher proportion of treasury bill issuance in 2020-21 will be allocated to the 6- and 12-month maturities relative to 2019-20. By the end of 2020-21, the treasury bill stock is expected to increase to $294 billion, about $142 billion higher than the level at the end of 2019-20.

Cash management bills (i.e., short-dated treasury bills) help manage government cash requirements in an efficient manner. These instruments continue to be used in 2020-21.

Bond Program and Historic Increases in Long-term Issuances

Given the rapid increase in the stock of treasury bills, the bond program for 2020-21 is also significantly increasing across all nominal bond sectors, including an unprecedented level of 10-year and 30-year bonds, to make Canada’s borrowings less vulnerable to increases in interest rates and maintain issuance capacity in the treasury bill sector.

Annual gross bond issuance is planned to be about $409 billion in 2020-21, $285 billion higher than the $124 billion issued for 2019-20 (Table A3.3). The total bond stock is planned to increase by $317 billion to $915 billion. As 2020-21 progresses, almost 70 per cent of financial requirements is projected to be funded with bonds. The government is issuing a combined $106 billion in 10-year and 30-year bonds, compared to $17 billion in 2019-20 (Chart A3.5). Given the historic level of issuance in the 10-year and 30-year sectors, the government will consult regularly with market participants and make appropriate adjustments, if necessary, to maintain well-functioning markets.

Chart A3.5
Government of Canada Issuance in Long-term Bonds (historical vs. planned)
Chart A3.5 - Government of Canada Issuance in Long-term Bonds (historical vs. planned

Source: Department of Finance

  • Text version
    10-Year 30-Year
    2006-07 10.4 3.3
    2007-08 10.7 3.4
    2008-09 15.7 5.1
    2009-10 17.4 7.0
    2010-11 12.0 5.0
    2011-12 10.0 4.7
    2012-13 16.5 6.7
    2013-14 14.0 5.0
    2014-15 13.3 4.6
    2015-16 10.0 3.2
    2016-17 15.0 4.3
    2017-18 15.0 4.3
    2018-19 13.5 3.8
    2019-20 13.0 4.2
    2020-21 73.5 32.0

In pursuing much higher bond issuances, the government is introducing three new maturity dates to increase issuance capacity in the bond program: two by promoting 3-year bonds to their own maturity dates and one new maturity date in the 10-year sector (see section on Maturity Date Cycles).

Canada entered the crisis with by far the lowest federal market debt stock among the G7 (also lowest based on market debt-to-GDP) – less than half that of Germany, which has the second lowest federal market debt among the G7. This results in market conditions that favor treasury bills and shorter-term debt to respond to funding shocks.

A significant proportion of Canada’s extraordinary borrowings to date in 2020-21 have consisted of short-term instruments, mainly treasury bills, given the ability to issue these instruments in volume quickly to raise needed funding. France, the United States, and Japan have followed a similar issuance approach to fund their initial COVID-19 responses (Chart A3.6). With the Debt Management Strategy the government will begin shifting issuances toward long-term bonds in order to take advantage of low interest rates. As this occurs, Canada’s debt structure will be prudently positioned against G7 peers in order to maximize flexibility, predictability and liquidity.

In contrast, Germany and Italy, whose response to the crisis was smaller relative to the size of their outstanding market debt, funded a larger share of their initial crisis debt through medium- and long-term bonds.

Chart A3.6
Federal Debt Issuance Comparison Post-COVID (% since March 16)
Chart A3.6 - Federal Debt Issuance Comparison Post-COVID (% since March 16)

Source: Various G7 debt management websites, as of June 26, 2020 (Japan and France as of May 31, 2020)
Includes inflation linked products and syndications where applicable
*DMS 2020-21 planned issuance
Note: UK not shown due to lack of comparability.

  • Text version
    France Italy Germany US Japan Canada Canada 2020-21 DMS*
    Tbill 61% 34% 24% 90% 82% 81% 44%
    Short (2Y-4Y) 8% 16% 7% 3% 6% 9% 29%
    Medium (5Y-9Y) 26% 26% 13% 5% 4% 6% 12%
    Long (>=10Y) 5% 24% 56% 3% 8% 4% 15%

Going forward, like most other countries, Canada’s debt management strategy is already increasing bond issuances steadily to help manage rollover risk (Table A3.4), with significantly more 10-year and 30-year bond issuances, to reduce pressure on the treasury bill sector, and ultimately rebuild contingency capacity in the event that significant funding is needed again quickly. To put the government’s focus on long-term bonds into perspective, the share of bond issuances allocated to long maturities (10-years or greater) will nearly double this year, rising from 14 per cent of annual issuance in 2019-20 to 26 per cent in 2020-21.

Table A3.3
Bond Issuance Plan for 2020-21
billions of dollars, end of fiscal year
  2016-17
Actual
2017-18
Actual
2018-19
Actual
2019-20
Estimated
2020-21
Projected
Gross bond issuance1 135 138 101 124 409
Bond buybacks on a switch basis -1 -1 -1 -1 0
Net issuance 134 137 100 123 409
Maturing bonds and adjustments2 -103 -97 -107 -99 -92
Change in bond stock 32 40 -7 24 317
Sources: Bank of Canada; Department of Finance calculations
Note: numbers may not add due to rounding.
1   Includes switch buyback issuance and additional debt that accrues during the fiscal year as a result of the inflation adjustments to Real Return Bonds.
2   Includes cash management bond buybacks.
Table A3.4
Projected Allocation of Gross Bond Issuance for 2020-21
billions of dollars, end of fiscal year  2019-20 Previous Year 2020-21 Planned Change in Issuance
Issuance ($ Billions) Share of Issuance Issuance ($ Billions) Share of Issuance
Gross Bond Issuance 124   409   229%
Of which…          
  2-year 53 43% 150 37% 183%
  3-year 19 15% 65 16% 236%
  5-year 33 27% 88 21% 165%
  10-year 13 11% 74 18% 465%
  30-year 4 3% 32 8% 662%
  RRB 1.8 1% 1.4 0% -22%
Total gross bond issuance 124 100% 409 100% 229%
Table A3.5
Projected Gross Issuance of Bonds and Bills for 2020-21
billions of dollars, end of fiscal year
  2019-20 Previous Year 2020-21 Planned Increase
Treasury bills 152 294 94%
  2-year 53 150 183%
  3-year 19 65 236%
  5-year 33 88 165%
  10-year 13 74 465%
  30-year 4 32 662%
  RRB 1.8 1.4 -22%
Total bonds 124 409 229%
Total gross issuance 276 713 155%

Maturity Date Cycles and Temporary Benchmark Bond Target Range Sizes

Due to much higher issuance levels in core sectors, particularly in 10-year and 30-year bonds, the benchmark bond target ranges have been increased relative to fiscal year 2019-20 (Table A3.6). The ranges serve as a temporary guide to the potential final size of each benchmark in the context of evolving borrowing requirements in 2020-21.

In pursuing much higher bond issuance and help smooth the cash flow profile of upcoming maturities, in 2020-21 the government will add a new December 1st maturity date in the 10-year sector and two new maturity dates in the 3-year bond sector, April 1st and October 1st, by promoting the 3-year bond sector to its own maturity dates (previously fungible with 5-year bonds).

The first opening of the new 10-year December 1st 2030 bond and of the 3-year April 1st 2024 bond are expected to take place in the third quarter of fiscal year 2020-21. The government plans to continue issuing the 10-year June 1st 2030 bond and the 3-year Sept 1st 2023 bond in the second quarter. The 3-year October 1st 2024 bond will be opened in early 2021-22. These changes will improve issuance capacity in the bond program and help to extend the average maturity of the debt at low interest rates.

Table A3.6
Maturity Date Patterns and Benchmark Size Ranges for 2020-21
billions of dollars
  June Aug. Sept. Nov. Dec. Feb. Mar. Apr. May
2-year   20-35   35-50   35-50     35-50
3-year     40-502         30-50  
5-year     45-55       35-50    
10-year 30-50       30-50        
30-year3         25-45        
Real Return Bonds3,4         9-15        
Source: Department of Finance calculations
Note: These amounts do not include coupon payments.
1   Actual annual issuance may differ.
2   Issuance in the 3-year sector will be fungible with an old 5-year benchmark bonds. The September benchmark size range for the 3-year sector presented here is in addition to fungible outstanding previous 5-year benchmark bonds.
3   The 30-year nominal bond and Real Return Bond do not mature each year or in the same year as each other.
4   Benchmark size range includes estimate for inflation adjustment, while planned annual issuance does not.

Bond Auction Schedule

In 2020-21, there will be quarterly auctions of 2-, 3-, 5-, 10 and 30-year bonds. Some of these bonds may be issued multiple times per quarter. The number of planned auctions and the number of planned auctions per benchmark bond in 2020-21 for each sector is shown in Table A3.7. The actual number of auctions that occur may be different from the planned number of auctions due to unexpected changes in borrowing requirements.

The government led a specific market consultation on Real Return Bonds. A large portion of market participants reported that the demand for the Real Return Bonds has declined and that the liquidity in the sector is poor and worsening. Reflecting comments received during these consultations, the planned annual issuance will be $400 million less than in 2019-20, but the number of planned Real Return Bond auctions will increase from three to four auctions in 2020-21 as per market participants’ preference. A summary of the Real Return Bonds Consultations is available at the following link: https://www.bankofcanada.ca/wp-content/uploads/2020/03/governement-canada-rrb-consultations-summary.pdf.

Table A3.7
Maturity Date Patterns and Benchmark Size Ranges for 2020-21
billions of dollars
Sector Planned Number of Auctions Planned Auctions Per Benchmark
2-year 20-28 4-8
3-year 10-20 5-10
5-year 10-20 5-10
10-year 10-20 5-10
30-year 8-12 N/A1
Real Return Bond 4 N/A1
Source: Department of Finance
1   As 30-year and RRB benchmarks are built over multiple years, the number of planned auctions per benchmark may vary.

The dates of each auction will continue to be announced through the Quarterly Bond Schedule, which is published on the Bank of Canada’s website prior to the start of each quarter.

Bond Buyback Programs

In light of the Bank of Canada’s purchases of Government of Canada bonds in the secondary market, regular and cash management bond buyback operations are not planned for 2020-21.

Promoting Well-Functioning Markets

Given extraordinary borrowing requirements in 2020-21, the government has put in place temporary measures to promote participation at government securities auctions. These include temporarily increasing bidding limits for primary dealers, which was set to 25 per cent of auction size, to a maximum of 40 per cent. The aggregate bidding limit (limit on behalf of dealers and customers) has also increased from 40 per cent to 50 per cent. In addition, the government has lowered obligations for dealers by temporarily widening the range of yields at which they are required to bid to meet their minimum obligations.

The Bank of Canada has also launched a number of measures and facilities to promote the efficient and continuous functioning of funding markets, including increasing the amount of Government of Canada securities it purchases at treasury bill auctions and introducing a secondary market bond purchase program. The Bank of Canada has also expanded its term repo operations to support liquidity in the financial markets. These measures have helped the government borrow at or near record low interest rates.

Management of Canada’s Official International Reserves

The Exchange Fund Account (EFA), which is held in the name of the Minister of Finance, represents the largest component of Canada’s official international reserves. It is a portfolio of Canada’s liquid foreign exchange reserves and special drawing rights (SDRs)[1] used to aid in the control and protection of the external value of the Canadian dollar and provide a source of liquidity to the government. In addition to the EFA, Canada’s official international reserves include Canada’s reserve position held at the IMF.

The government borrows to invest in liquid reserves, which are maintained at a level at or above 3 per cent of nominal GDP. Net funding requirements for 2020-21 are estimated to be around US$9 billion, but may vary as a result of movements in foreign interest rates and exchange rates.

Foreign debt is used exclusively to provide funding for Canada’s Official International Reserves. The rise in foreign funding anticipated in fiscal year 2020-21 is due to the likelihood that Canada’s IMF commitments will rise and to replace the use of LIBOR-based cross-currency swap funding.

The mix of funding sources used to finance the liquid reserves in 2020-21 will depend on a number of considerations, including relative cost, market conditions and the objective of maintaining a prudent foreign-currency-denominated debt maturity structure. Potential funding sources include a short-term US-dollar paper program (Canada bills), medium-term notes, cross-currency swaps involving the exchange of Canadian dollars for foreign currency to acquire liquid reserves, and the issuance of global bonds.

Further information on foreign currency funding and the foreign reserve assets is available in the Report on the Management of Canada’s Official International Reserves and in The Fiscal Monitor.

Cash Management

The core objective of cash management is to ensure that the government has sufficient cash available at all times to meet its operating requirements.

Cash consists of moneys on deposit with the Bank of Canada, chartered banks and other financial institutions. Cash with the Bank of Canada includes operational balances and balances held for prudential liquidity. Periodic updates on the liquidity position are available in The Fiscal Monitor.

Prudential Liquidity

The government holds liquid financial assets in the form of domestic cash deposits and foreign exchange reserves to safeguard its ability to meet payment obligations in situations where normal access to funding markets may be disrupted or delayed. The government’s overall liquidity levels cover at least one month of net projected cash flows, including coupon payments and debt refinancing needs.

Owing to the government's ample fiscal capacity and continued access to funding markets, the government did not need to access liquidity from its Prudential Liquidity Plan.


[1]   SDRs are international reserve assets created by the IMF whose value is based on a basket of international currencies.

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