Canada cuts debt issuance; ends sale of inflation-linked bonds

Canada is reducing the amount of debt it plans to issue in the current fiscal year, reflecting an improvement in its fiscal position, and ending the sale of bonds that provide protection from inflation, a fiscal update document showed on Thursday.

Bond issuance for the 2022-23 fiscal year has been cut by C$21 billion ($15.3 billion) from the level planned in a budget document in April to C$191 billion and the year-end stock of T-bills is expected to be C$21 billion less at C$192 billion.

The fiscal year runs until the end of March. The deficit projection was cut for 2022-23 and for future years despite rising government borrowing costs. As a share of GDP, public debt charges are expected to rise to 1.2% in the current fiscal year from 1% in 2021-22.

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That brings total debt issuance a step closer to more normal levels after it surged to C$593 billion in 2020-21 due to the COVID-19 crisis.

The government said it has decided to cease issuance of real return bonds, which have a coupon that is linked to the level of the consumer price index, effective immediately, due to low demand for the product.

A 30-year real return bond auction had been planned for Dec. 1.

($1 = 1.3725 Canadian dollars)