British Columbia Weighs Selling Panda and Masala Bonds

  • New government pledges to stick to policy of budget surpluses
  • Province sold 30-year bonds in the domestic market last month

British Columbia, Canada’s fastest-growing province, is considering bond sales in China and India after raising money domestically in the newly elected government’s first foray into debt markets.

Carole James

Photographer: Christopher Goodney/Bloomberg

“We’re looking right now at panda bonds,” British Columbia Finance Minister Carole James said in an interview Tuesday in New York, adding the province is also considering a masala bond. “Both of those are pieces that we’re looking at now. We’ll make a decision in the next two months whether we’ll do a reissue on panda.”

The New Democratic Party-led government took power in July after striking a deal with the Green Party to create the province’s first minority government in more than six decades. British Columbia sold C$500 million ($400 million) of 30-year securities last month, reopening a bond it issued in April 2015.

While not a frequent issuer, the AAA rated province is a diversified debtor, having sold bonds in seven currencies, including the renminbi, the rupee, the Canadian, U.S. and Australian dollars, the euro and the Swiss franc. British Columbia sold so-called masala and panda bonds last year.

“We’re in very good shape,” James said from the Bloomberg head office in New York. “We’ve got diversification in our economy and diversification in our bonds.” 

British Columbia’s Canadian dollar bonds returned 0.5 percent this year, lagging Bank of America/Merrill Lynch’s broad provincial and municipal bond index, which generated a 0.7 percent return.

Tighter Spreads

The relative yield on the province’s 2.55 percent bonds due in June 2027 traded 63 basis points above similar-maturity federal government bonds, the least since Aug. 2. Similar spreads for Ontario and Quebec both stood at 68 basis points.

Premier John Horgan and his administration are set to boost spending after campaigning to make life more affordable for the average British Columbian -- pledges that helped end the 16-year rule of the Liberal Party whose tenure coincided with surging property prices and stagnant incomes.

Last month it cut its forecast for a budget surplus in the fiscal year ending March 31 to C$246 million, from the C$295 million surplus estimate from the previous government in February. The surplus is down from C$2.8 billion last year.

The government is committed to balancing the books, even if the economy slows, James said.

“Balanced budgets are critically important to our new government,” James said. “We’ve shown the importance of that by building prudence into the economic plan” by using a more conservative growth projection than private-sector forecasts.

British Columbia is forecasting growth of 2.9 percent this year, which would make it among the fastest-growing regions in the country.

    Before it's here, it's on the Bloomberg Terminal.