Ontario plans to sell more green bonds this year and will take advantage of lower yields to issue more 30-year debt, according to the head of the finance authority for the Canadian province.
The drop in yields over the last six months makes 30-year bonds more attractive, after the long-term notes accounted for a quarter of Ontario’s borrowing in public markets last fiscal year.
“We really like the 30-year term right now because that’s where rates have dropped the most,” Gadi Mayman, chief executive officer of the Ontario Financing Authority, said in an interview Tuesday at Bloomberg’s New York headquarters. “The curve is very flat. So if we can issue out that far” with low rates, “we will,” he said.
“We are going to try to extend term as much as we can,” he added.
Investor Demand
“The offset is that with the flattening of the curve, investors may be less interested in going out there,” Mayman said. “So we need to make sure before we do a 30-year issue that investors are going to be there.”
The province has set a target to raise 70 percent to 80 percent of its borrowing plan in Canadian dollars, though that could change slightly depending on market conditions, he said.
“If we end up with international markets, particularly in U.S. dollars or euros, particularly strong we might be below 70 percent,” he said. “We won’t go much above 80 percent because it’s really important for us to continue to borrow internationally.”
Ontario also plans to ramp up its sales of green bonds, which are used to finance projects like renewable energy or public transit that can help reduce the emissions of green-house gases. Ontario sold one green bond in January, for the fiscal year that ended March 31.
“We may look at doing more than one this year,” Mayman said.
At the same time, the province will continue its fight to block the federal government’s imposition of a carbon tax, which went into effect April 1 after Premier Doug Ford scrapped a previous cap and trade program.
Source: Bloomberg