Debt Management Report 2017–2018 - Part 2
Completed Treasury Evaluation Reports
In order to inform future decision making and to support transparency and accountability, different aspects of the Government of Canada's treasury activities are reviewed periodically under the Treasury Evaluation Program. The program's purpose is to obtain periodic external assessments of the frameworks and processes used in the management of wholesale and retail market debt, cash and reserves as well as the treasury activities of other entities under the authority of the Minister of Finance.
Reports on the findings of these evaluations and the Government's response to each evaluation are tabled with the House of Commons Standing Committee on Public Accounts by the Minister of Finance. Copies are also sent to the Auditor General of Canada. The reports are posted on the Department of Finance Canada website.
|Debt Management Objectives||1992|
|Debt Structure—Fixed/Floating Mix||1992|
|Internal Review Process||1992|
|External Review Process||1992|
|Benchmarks and Performance Measures||1994|
|Foreign Currency Borrowing—Canada Bills Program||1994|
|Developing Well-Functioning Bond and Bill Markets||1994|
|Liability Portfolio Performance Measurement||1994|
|Retail Debt Program||1994|
|Guidelines for Dealing With Auction Difficulties||1995|
|Foreign Currency Borrowing—Standby Line of Credit and FRN||1995|
|Treasury Bill Program Design||1995|
|Real Return Bond Program||1998|
|Foreign Currency Borrowing Programs||1998|
|Initiatives to Support a Well-Functioning Wholesale Market||2001|
|Debt Structure Target/Modelling||2001|
|Reserves Management Framework1||2002|
|Funds Management Governance Framework1||2004|
|Retail Debt Program1||2004|
|Borrowing Framework of Major Federal Government-Backed Entities1||2005|
|Receiver General Cash Management Program1||2006|
|Exchange Fund Account Evaluation1||2006|
|Risk Management Report1||2007|
|Evaluation of the Debt Auction Process1||2010|
|Evaluation of the Asset Allocation Framework of the Exchange Fund Account1||2012|
|Report of the Auditor General of Canada on Interest-Bearing Debt2||2012|
|Crown Borrowing Program Evaluation1||2013|
|Retail Debt Evaluation1||2015|
|1 Available on the Department of Finance Canada website.
2 This audit was conducted outside of the Treasury Evaluation Program.
Debt Management Policy Measures Taken Since 1997
The fundamental objectives of debt management are 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. For the Government as a debt issuer, a well-functioning market attracts investors and contributes to keeping funding costs low and stable over time. For market participants, a liquid and transparent secondary market in government debt provides risk-free assets for investment portfolios, a pricing benchmark for other debt issues and derivatives, and a primary tool for hedging interest rate risk. The following table lists significant policy measures that have been taken to achieve stable, low-cost funding and ensure a well-functioning Government of Canada securities market.
|Dropped the 3-year bond benchmark||1997|
|Moved from weekly to bi-weekly treasury bill auctions||1998|
|Introduced a cash-based bond buyback program||1999|
|Introduced standardized benchmarks (fixed maturities and increased size)||1999|
|Started regular cross-currency swap-based funding of foreign assets||1999|
|Introduced a switch-based bond buyback program||2001|
|Allowed the reconstitution of bonds beyond the size of the original amount issued||2001|
|Introduced the cash management bond buyback program||2001|
|Reduced targeted turnaround times for auctions and buyback operations||2001|
|Advanced the timing of treasury bill auctions from 12:30 p.m. to 10:30 a.m.||2004|
|Advanced the timing of bond auctions from 12:30 p.m. to 12:00 p.m.||2005|
|Reduced the timing between bond auctions and cash buybacks to 20 minutes||2005|
|Dropped one quarterly 2-year auction||2006|
|Announced the maintenance of benchmark targets through fungibility (common dates)||2006|
|Consolidated the borrowings of three Crown corporations||2007|
|Changed the maturity of the 5-year benchmark and dropped one quarterly 5-year auction||2007|
|Reintroduced the 3-year bond benchmark||2009|
|Increased the frequency of cash management bond buyback operations from bi-weekly to weekly||2010|
|Announced a new framework for the medium-term debt management strategy||2011|
|Announced plans to increase the level of prudential liquidity by $35 billion over 3 years||2011|
|Added four new maturity dates—February 1, May 1, August 1 and November 1||2011|
|Increased benchmark target range sizes in the 2-, 3- and 5-year sectors||2011|
|Announced a temporary increase in longer-term debt issuance||2012|
|Announced changes to the Terms and Conditions Governing the Morning Auction of Receiver General Cash Balances||2013|
|Introduced ultra-long bond issuance||2014|
|Discontinued 3-year issuance||2015|
|Increased benchmark target range sizes in the 2- and 5-year sectors||2015|
|Increased benchmark target range sizes in the 2-, 5- and 10-year sectors||2016|
|Reintroduced the 3-year bond benchmark||2016|
|Introduced a pilot program to increase flexibility in the maximum repurchase amount at CMBB operations||2017|
|Discountinued the sales of new Canada Savings Bonds||2017|
asset-liability management: An investment decision-making framework that is used to concurrently manage a portfolio of assets and liabilities.
average term to maturity: The weighted average amount of time until the securities in the debt portfolio mature.
benchmark bond: A bond that is considered by the market to be the standard against which all other bonds in that term area are evaluated against. It is typically a bond issued by a sovereign, since sovereign debt is usually the most creditworthy within a domestic market. Usually it is the most liquid bond within each range of maturities and is therefore priced accurately.
budgetary deficit: The shortfall between government annual revenues and annual budgetary expenses.
buyback on a cash basis: The repurchase of bonds for cash. Buybacks on a cash basis are used to maintain the size of bond auctions and new issuances.
buyback on a switch basis: The exchange of outstanding bonds for new bonds in the current building benchmark bond.
Canada bill: A promissory note denominated in US dollars, issued for terms of up to 270 days. Canada bills are issued for foreign exchange reserves funding purposes only.
Canada Investment Bond: A non-marketable fixed-term security instrument issued by the Government of Canada.
Canada note: A promissory note usually denominated in US dollars, and available in book-entry form. Canada notes can be issued for terms of nine months or longer, and can be issued at a fixed or a floating rate. Canada notes are issued for foreign exchange reserves funding purposes only.
Canada Premium Bond: A non-marketable security instrument issued by the Government of Canada, which is redeemable once a year on the anniversary date or during the 30 days thereafter without penalty.
Canada Savings Bond: A non-marketable security instrument issued by the Government of Canada, which is redeemable on demand by the registered owner(s), and which, after the first three months, pays interest up to the end of the month prior to cashing.
cross-currency swap: An agreement that exchanges one type of debt obligation for another involving different currencies and the exchange of the principal amounts and interest payments.
duration: Measures the sensitivity of the price of a bond or portfolio to fluctuations in interest rates. It is a measure of volatility and is expressed in years. The higher the duration number, the greater the interest rate risk for bond or portfolio prices.
electronic trading system: An electronic system that provides real-time information about securities and enables the user to execute financial trades.
Exchange Fund Account (EFA): An account that aids in the control and protection of the external value of the Canadian dollar and which provides a source of liquidity for the Government of Canada. Assets held in the EFA are managed to provide liquidity to the Government and to promote orderly conditions for the Canadian dollar in the foreign exchange markets, if required.
financial source/requirement: The difference between the cash inflows and outflows of the Government's Receiver General account. In the case of a financial requirement, it is the amount of new borrowing required from outside lenders to meet financing needs in any given year.
fixed-rate share of market debt: The proportion of market debt that does not mature or need to be repriced within one year (i.e. the inverse of the refixing share of market debt).
foreign exchange reserves: The foreign currency assets (e.g. interest-earning bonds) held to support the value of the domestic currency. Canada's foreign exchange reserves are held in the Exchange Fund Account.
Government of Canada securities auction: A process used for selling Government of Canada debt securities (mostly marketable bonds and treasury bills) in which issues are sold by public tender to government securities distributors and approved clients.
government securities distributor: An investment dealer or bank that is authorized to bid at Government of Canada auctions and through which the Government distributes Government of Canada treasury bills and marketable bonds.
interest-bearing debt: Debt consisting of unmatured debt, or debt issued on the credit markets, liabilities for pensions and other future benefits, and other liabilities.
Large Value Transfer System: An electronic funds transfer system introduced in February 1999 and operated by the Canadian Payments Association. It facilitates the electronic transfer of Canadian-dollar payments across the country virtually instantaneously.
marketable bond: An interest-bearing certificate of indebtedness issued by the Government of Canada, having the following characteristics: bought and sold on the open market; payable in Canadian or foreign currency; having a fixed date of maturity; interest payable either in coupon or registered form; face value guaranteed at maturity.
marketable debt: Market debt that is issued by the Government of Canada and sold via public tender or syndication. These issues can be traded between investors while outstanding.
money market: The market in which short-term capital is raised, invested and traded using financial instruments such as treasury bills, bankers' acceptances, commercial paper, and bonds maturing in one year or less.
non-market debt: The Government's internal debt, which is, for the most part, federal public sector pension liabilities and the Government's current liabilities (such as accounts payable, accrued liabilities, interest payments and payments of matured debt).
overnight rate; overnight financing rate; overnight money market rate; overnight lending rate: An interest rate at which participants with a temporary surplus or shortage of funds are able to lend or borrow until the next business day. It is the shortest term to maturity in the money market.
primary dealer: A member of the core group of government securities distributors that maintain a certain threshold of activity in the market for Government of Canada securities. The primary dealer classification can be attained in either treasury bills or marketable bonds, or both.
primary market: The market in which issues of securities are first offered to the public.
Real Return Bond: A bond whose interest payments are based on real interest rates. Unlike standard fixed-coupon marketable bonds, the semi-annual interest payments on Government of Canada Real Return Bonds are determined by adjusting the principal by the change in the Consumer Price Index.
refixing share of market debt: The proportion of market debt that matures or needs to be repriced within one year (i.e. the inverse of the fixed-rate share of market debt).
refixing share of market debt to gross domestic product (GDP): The amount of market debt that matures or needs to be repriced within one year relative to nominal GDP for that year.
secondary market: The market where existing securities trade after they have been sold to the public in the primary market.
sovereign market: The market for debt issued by a government.
treasury bill: A short-term obligation sold by public tender. Treasury bills, with terms to maturity of 3, 6 or 12 months, are currently auctioned on a bi-weekly basis.
ultra-long bond: A bond with a maturity of 40 years or longer.
yield curve: The conceptual or graphic representation of the term structure of interest rates. A "normal" yield curve is upward sloping, with short-term rates lower than long-term rates. An "inverted" yield curve is downward sloping, with short-term rates higher than long-term rates. A "flat" yield curve occurs when short-term rates are the same as long-term rates.
Consultations and Communications Branch
Department of Finance Canada
90 Elgin Street
Ottawa, Ontario K1A 0G5
I Total Liabilities, Outstanding Market Debt and Debt Charges, as at March 31
II Government of Canada Outstanding Market Debt, as at March 31
III Issuance of Government of Canada Domestic Bonds
IV Outstanding Government of Canada Domestic Bonds, as at March 31, 2018
V Government of Canada Cross-Currency Swaps Outstanding, as at March 31, 2018
VI Crown Corporation Borrowings, as at March 31
|Year||Market debt||Market debt value adjustments||Accounts payable and accrued liabilities||Pension and other liabilities (restated)1||Total liabilities (restated)1|
|1 Historical Public Accounts data for pension and other liabilities and total liabilities have been restated back to 2008–09 following revisions in methodology.|
|Accumulated deficit and debt charges|
|Financial assets||Net debt
debt charges (restated)1
|1 Historical Public Accounts data for total liabilities, net debt, the accumulated deficit and gross public debt charges have been restated back to 2008–09 following revisions in methodology.|
|Payable in Canadian dollars|
|Year||Treasury bills||Marketable bonds1||Retail debt||Canada Pension
|1 Inflation adjusted.|
|Payable in foreign currencies|
|Year||Canada bills||Marketable bonds||Canada notes1||Euro medium-term notes1||Standby drawings||Term loans||Total|
|1 Amounts for 2016 and 2017 and have restated following historical revisions.|
|Total market debt|
|Year||Total payable in Canadian dollars||Total payable in
holdings and consolidation adjustment1
|Total market debt||Average
|1 Because certain comparative figures have been restated to reflect the presentation method used in recent years, the numbers presented in this reference table can differ from numbers presented in other sections of the Debt Management Report. In the reference table, ''Government's holdings and consolidation adjustment'' is presented separately but in the rest of the report the amount is incorporated into the figures. For more information, please consult table 6.2 and table 6.3 of the Public Accounts of Canada 2018.|
|Nominal1||Real Return Bonds||Buybacks|
|1 Including nominal issuance through switch buyback operations.
Source: Bank of Canada.
|Maturity date||Amount||Coupon rate|
|Real Return Bonds—total||46,225||12,661||58,886|
|Note: Outstanding bond amounts reported in this table are in accordance with Bank of Canada reports, which may vary slightly with Government of Canada amounts due to differences in classification methods.
Source: Bank of Canada.
|Swaps of domestic obligations||Swaps of foreign obligations|
|Note: Foreign currency swaps converted to Canadian dollars using Bank of Canada closing exchange rates as of March 31, 2018. Includes cross-currency swaps related to International Monetary Fund transactions. Table does not include $1,300 million in foreign exchange forwards that were outstanding as at March 31, 2018. There were no foreign exchange swaps outstanding as at March 31, 2018. Totals may not add due to rounding.
Source: Department of Finance Canada.
|Borrowings from the market||2009||2010||2011||2012||2013||2014||2015||2016||2017||2018|
|Export Development Canada||26,925||23,001||22,033||24,141||26,613||36,393||41,985||46,687||49,226||55,470|
|Business Development Bank of Canada||2,354||1,488||897||658||648||507||305||253||163||139|
|Farm Credit Canada||3,949||1,765||1,293||913||691||615||669||762||815||833|
|Canada Mortgage and Housing Corporation||6,153||4,421||3,039||2,221||1,870||1,465||1,429||282||0||0|
|Canada Housing Trust1||160,664||180,440||199,238||213,251||212,639||205,113||207,544||217,392||225,306||233,981|
|Canada Post Corporation||93||90||1,051||1,051||1,051||1,051||1,051||997||997||997|
|1 Canada Housing Trust has been included in the government reporting entity effective April 1, 2005 as a result of the application of a new accounting standard.|
Bank of Canada
|Canada Mortgage and Housing Corporation1||61,863||72,262||69,569||66,595||63,123||21,173||10,708||10,531||9,811||8,687|
|Farm Credit Canada||11,450||15,931||17,558||19,326||21,174||22,029||22,691||23,438||25,684||28,009|
|1 Includes outstanding lending related to the Insured Mortgage Purchase Program for 2009 to 2014.
Source: Public Accounts of Canada.