As a collection agency with offices in Edmonton, Calgary and the GTA we are watching with keen interest the unfolding of the following events with respect to their impact (or lack thereof) on Canadian credit markets.
In mid November the Bank of Canada (BOC) announced for the first time that they would look to start buying government-backed mortgage bonds, also known as Canada Mortgage Bonds which are guaranteed by Canada Mortgage and Housing Corp. Well, it took less than a month for the BOC to execute on its intentions, because yesterday, the central bank purchased Canada Housing Trust bonds for the first time ever, scooping up C$250 million ($187 million) of the federal agency’s C$5.5 billion five-year notes which priced today.
Meanwhile, the BOC stepped in at just the right time: yesterday’s deal marks the completion of Canada Housing Trust’s funding plan for the year. The agency has an issuance limit of C$40 billion for 2018, and after today’s deal it has already priced C$39.75 billion of new bonds. In other words, courtesy of the central bank, not a concern is in sight, although one can’t help but recall that just last week the BOC said it would step in only if investor demand did no meet issuance standards. Apparently then the BOC’s purchase confirms investor demand was weak.
What would have happened had the BOC not stepped in to complete “investor” demand for the new issue?
And now, considering that the Canadian housing market is suddenly sliding and household insolvencies and bankruptcies are soaring we wonder if next on the BOC’s “shopping list” will be overdue credit card bills and second mortgages!