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Ottawa, March 28, 1995
1995-029

Government of Canada 1995-96 Debt Strategy

Secretary of State (Finance) Doug Peters today announced on behalf of the Minister of Finance, Paul Martin, that Canada's debt strategy will continue to be designed to provide stable, low- cost funding for the Government of Canada. Measures will continue the process of improving the functioning of Canada's fixed income market to minimize debt costs.

Greater debt cost stability will be achieved by raising the percentage of the debt stock that is at fixed interest rates. The medium-term target for the fixed rate percentage of the debt stock has been raised to 65 per cent from 60 per cent, extending the average term to maturity of Canada's debt stock. This action will reduce the over-reliance on floating rate debt and Canada's exposure to short term investment decisions by offshore investors.

In keeping with other recent changes designed to improve the liquidity of the bond market (including the building of large bond benchmarks and the establishment of a regular issuance calendar), the Government will re-introduce the three-year maturity into the benchmark bond program. There will be two three-year issues during the year to build a benchmark with a target range of between $4 and $6 billion. The target range for benchmarks at two years (between $4 and $6 billion) and five, 10 and 30 years (between $6 and $9 billion) will be maintained.

Thirty-year bonds will become part of the regular quarterly auction cycle, with the date announced in the quarterly auction calendar. The Government will also continue its Real Return Bond program. Four RRB issues are planned for 1995-96, using a mix of syndicated and single-price auction distribution mechanisms. A new RRB maturity will be opened during the year.

Mr. Peters noted that last month's budget announced plans for an enhanced retail debt initiative. The objective of this initiative is to provide Canadians with greater opportunity to invest in Canada, thereby reducing reliance on foreign investors. This initiative will bring important benefits to Canadians by providing better access to a family of safe and secure Government of Canada obligations.

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For further information:

Jon Cockerline
Financial Markets Division
(613) 992-4468