FX Updated: Canada’s Monthly Market Insights

The FX market changes or upgrades quite frequently and it is vital to stay informed of the recent happenings to be a pro in this field. In Canada’s foreign reserves, the government authorities recently made a substantial upgrade.

As announced by the Canadian Government, a five-year US-dollar global bond has been introduced, which resulted in Canada’s second-largest order book for a global bond in 15 years, reaching US$13.8 billion.

Following the introduction of Budget 2024, this development affirms strong investor confidence in Canada’s sound fiscal management and is emblematic of its AAA credit ratings.

The investor base for this bond is geographically diverse, containing central banks, international institutions, bank treasuries, and foreign-based investment funds. This activity is mainly focused on upholding the stability of Canada’s foreign currency reserves.

It will function as a source of prudential liquidity and promote well-managed conditions for the Canadian dollar in foreign exchange markets. Also, in the Budget 2024, the government outlined and reaffirmed the commitment to maintain liquid foreign reserves at or above three percent of the nominal gross domestic product.

The key highlights include:

This initiative includes the launch of a US dollar global bond priced at US$3 billion.
It received great interest from a wide array of global investors, priced more competitively in terms of credit spread than similar bonds issued by Canada’s peers in 2024.
They aim to offer cost-effective and diversified funding for the liquid foreign reserves held in the Exchange Fund Account.
In its most recent offering before April 2024, the Canadian government issued a U.S. dollar-denominated bond valued at $4 billion.

Finally, if we briefly sum up this update, this move underscores the government’s dedication to ensuring the stability and strength of Canada’s financial position on the global stage.