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UPDATE 1-Canada to sell more long-term bonds to lock in rates

by on September 27, 2012 8:26 pm GMT
 

Thu Sep 27, 2012 4:26pm EDT

* Says move driven by long-term rates near historic lows

* Extension of strategy announced in March budget

(Reuters) – The Canadian government plans to
do more borrowing using long-dated bonds to take advantage
long-term yields that are near historic lows, the finance
department and the Bank of Canada said on Thursday.

The move was described as an extension of plans announced in
the March budget.

At that time, the finance department said it would increase
temporarily its issue of 10-year bonds in the coming fiscal year
to take advantage of low rates.

The yields on 10- and 30-year Canadian
government bonds sank to record lows this year as
investors, fearing the fallout of Europe’s debt crisis, bought
more defensive assets.

“Given this environment, it is both advantageous and prudent
for our government to lock in additional long-term funding,”
Finance Minister Jim Flaherty said in a statement.

“These adjustments help us meet our goal of raising stable
and low-cost funding to meet the financial needs of our
government to best serve taxpayers.”

The central bank, which handles government debt auctions,
made the announcement as it released its auction schedule for
the next three months.

It said that for the remainder of the fiscal year that ends
on March 31, 2013, it would:

– hold an additional 10-year bond auction in the final
quarter of the fiscal year

– hold an additional 30-year nominal bond auction

– possibly increase the size of the 10-year and 30-year
nominal bond auctions.

It said that for the rest of the fiscal year it would halt
30-year bond buyback operations on a cash basis; and would
conduct one additional 30-year bond buyback operation on a
switch basis in the last quarter of the fiscal year.