11/23/14

Canada Ponders 3rd Ultra-Long Bond Sale by Gary Hirst

By Gary Hirst

This past week, Canada revealed that they were considering tapping into the bond market again—the ultra-long bond market. And, interestingly enough, this would be the third time this year that the nation would be considering an ultra-long bond sale.

The nation said, this past Wednesday, that they were considering entering the ultra-long debt market for the third time this year. They presumably re-enter the market through the reopening of their December 2064 bond, since they wish to take advantage of lower interest rates.

Canada entered the ultra-long bond market earlier this year. The nation first started their foray in April, and then made a return in July. Both trips into the market helped the nation raise 2.5 billion in Canadian dollars ($2.2 billion). The first outing in April raised the first 1.5 billion CAD, while the second outing in July raised the last 1 billion CAD.

Gary Hirst

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But, even as the nation raises money, they’re still pondering ways to lower borrowing costs over all. The nation’s federal finance department revealed the nation’s intentions to do so in a recent statement. The Canadian Department of Finance didn’t, however, mention how much [Canada] plans to raise, should they continue to offer up ultra-long bonds.

They did mentioned that the ‘market reentry would be a reopening of their already existing 2.75 Government of Canada bond, which is scheduled to mature in December 2064.’

On an interesting note, ultra-long bonds are typically avoided by national governments for several reasons. Although these debts often extend past 30 years, they carry higher interest rates than the usual security.

But, in a time where interest rates are lower, they’re looking decidedly more attractive to governments around the world. The United Kingdom, Japan and France are among several nations who have sold ultra-long bonds in recent times.

Should Canada decide to enter the market for a third time, it would mark the nation’s third time seeking ways to lower interest costs amid the uncertain economic condition across the globe.