(Adds details on issuance)
By Leah Schnurr
TORONTO, April 28 Canada issued its first
ultra-long term bond that will mature in 50 years, the
Department of Finance said on Monday, a rare move that will let
the government capitalize on the current low interest rate
The government of Canada issued C$1.5 billion worth of the
bonds with a yield of 2.96 percent. That was similar to where
the yield on the benchmark 30-year bond was trading
on Monday. The bonds will mature on Dec. 1, 2064.
The ultra-long debt could satisfy demand from investors,
such as pension funds, looking to hedge their long-term
liabilities, as well as those with long investment horizons,
said Hosen Marjaee, senior managing director of Canadian fixed
income at Manulife Asset Management in Toronto.
"It's an area of the curve that is a very long-term
investment," said Marjaee. "It does come very rarely."
The bond will also help the government lock in borrowing
costs that are near historic lows. Canada is one of the few
leading industrialized nations with an undisputed AAA rating and
its bonds are in high demand.
"The goal is probably to give them some kind of a
longer-term predictable interest rate," said Colin Cieszynski,
senior market analyst at CMC Markets Canada in Toronto.
"If we enter into an interest rate environment where
interest rates go up, then this could turn out to be a big win
for the government."
Sovereign bonds with a 50-year duration are not as common
as 30-year bonds, although several Canadian provinces already
issue ultra-long bonds. The United States does not issue a
50-year bond, but China and Britain do.
"It is a sign that obviously, if you're issuing a 50-year
bond and people buy it, then certainly there's a level of
confidence that Canada is a reasonably well-managed, stable
country that people are hoping will be in decent financial shape
50 years from now," Cieszynski said.
"Which is a far cry from if you tried to issue this in the
1990s," he added.
Canada's credit rating was cut in the early 1990s, when the
country grappled with large budget deficits.
(Additional reporting by Allison Martell; Editing by Peter
Galloway and Andre Grenon)