Ontario to Collect More Data on Bonds Amid Liquidity Concerns

Ontario is collecting data on bond trading volumes and market makers as investors are increasingly concerned with liquidity.

Liquidity is an “extremely important aspect” in a bond investors’ decision-making process and provinces need to take action to enhance the liquidity they offer, said James Devine, director of funding at the Ontario Financing Authority. Ontario is collecting data on trading volumes to get a better handle on who’s trading what and implementing a survey system so investors can give the province direct feedback.

“We are taking measures required to really incentivize people to maintain an active secondary market in our product,” Devine said Wednesday at Bloomberg LIVE’s Canadian fixed income conference in New York. “We think that’s probably one of the keys that’s necessary if you’re going to have a successful borrowing program.”

Canada’s provinces account for about a quarter of the C$2 trillion ($1.5 trillion) in outstanding long-term debt issued in the country’s bond market, Devine said. Provinces are borrowing as they tackle crumbling bridges and roads, while accommodating immigration that has expanded the population to about 35 million from 30 million in 2000.

Election Issue

Infrastructure spending has become a federal election issue with the Liberal Party planning tens of billions on transit, roads and other assets in the coming years. Canadians cast their ballots on Oct. 19.

To develop liquidity, provinces need to focus on core markets, including Canada, the U.S. and Europe, Devine said. Fragmenting a borrowing program to include rupee or dim sum bonds would hold back that aim, he said.

Ontario is the largest provincial issuer with about C$200 billion in domestic bonds.

Manitoba doesn’t see the need to pay extra to be in foreign markets, said Jim Hrichishen, the province’s deputy minister of finance. The province did not see a response from the market this summer when Moody’s Investors Service downgraded Manitoba’s ratings to Aa2 from Aa1 in July, he said.

“I think to a certain degree it was expected because Moody’s did give a signal,” Hrichishen said. “It was to a certain degree anticlimactic.”

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