BoC Balance Sheet: A Strict Diet of No Bonds

After feasting on Canadian fixed income, the Bank of Canada’s balance sheet is now officially on a strict diet of no bonds. With a goal of slimming down its holdings as assets mature and roll off, the central bank ceased purchasing Government of Canada (GoC) bonds in both primary and secondary markets. That is in stark contrast to the past couple of years when the central bank ate up a significant portion of bonds via both primary and secondary market purchases. During the pandemic, the Bank of Canada’s first foray into quantitative easing saw its GoC bond holdings swell from $90B to $430B. With the central bank pulling away from these purchases as a part of its quantitative tightening program, net bond issuance hitting the market will be equal to gross issuance. That means net GoC supply is set to sharply increase this fiscal year (chart 1).