Finance Minister Chrystia Freeland tabled the proposal earlier this year
Amid investor pressure, the federal government has walked back on a proposal to eliminate its $250-billion mortgage bond program.
Earlier this year, Finance Minister Chrystia Freeland tabled the proposal to help reduce the federal administration’s operational costs.
“The government has since met with over 30 market participants, received additional written input from stakeholders, and heard from many market participants about the utility of the Canada Mortgage Bond Program, with mortgage lenders indicating a need for such a market-based instrument to hedge risks,” the government said in its just-released fall economist statement.
To ensure the persistence of what the Liberal administration described as a mechanism that would support stable, cost-effective funding for Canadian mortgage lenders, the federal government said that it would instead begin purchasing up to an annual maximum of $30 billion of CMBs, starting as early as February 2024.
Canadian companies are at risk of facing higher interest costs as an unintended consequence of a government proposal to eliminate the country’s CA$260 billion bond program, an investors’ lobby group has warned.https://t.co/FcFNHf1bMv#mortgagenews #mortgagebond #interestrates
— Canadian Mortgage Professional Magazine (@CMPmagazine) July 7, 2023
“The remaining Canada Mortgage Bonds will continue to be available for market participants,” the government said, adding that it will be communicating regularly with market players to “ensure that the pace and volume of purchases are appropriate for market conditions and to address concerns where possible.”
The government said that it will be conducting additional consultations concerning any further government participation in CMBs.
“The Canadian debt market continues to function well despite higher supply and periods of heightened volatility in the global bond market,” it concluded. “There is generally a good supply-demand balance across different sectors.”
