Canada issues first ever 50-year bond; sells $1.5 billion in initial offering

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OTTAWA – The Government of Canada says it has gone ahead and sold 50-year bonds for the first time ever.

The Department of Finance said it has successfully issued $1.5 billion in the ultra-long sector with a yield of 2.96 per cent, just slightly more than the yield on its 30-year bond — previously the longest maturing bond issued by the government.

The new bond issue has a maturity date of Dec. 1, 2064.

Earlier in the day, the government said it was “considering” offering the bonds if market conditions were favourable, only to announce the sale by Monday afternoon.

The department said the move was in line with its budget commitment in 2012 to shift short-term bonds to the long term in order to take advantage of historically low interest rates and reduce exposure if interest rates rise sharply.

“In the current environment, it is both advantageous and prudent for our government to lock in additional long-term funding,” Finance Minister Joe Oliver said in a statement.

“This 50-year bond will help us meet our goal of raising stable and low-cost funding to meet Canada’s financial needs and best serve taxpayers.”

The announcement noted that Canada has the highest credit rating and a stable outlook.

Coincidentally, the Parliamentary Budget Officer issued a report Monday estimating the federal government has a 50 per cent chance of balancing the budget as early as the current fiscal year, and post significant surpluses from then on.

Bank of Montreal chief economist Doug Porter says there are advantage for the government to lock in terms of payments on their debts for a long period — similar to a homeowner locking in on a five-year mortgage rather than risk interest rates rising.

He said insurance companies and pension funds would be the natural customers for such long-term treasury bills.

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