Fearing that investor demand for Canadian dollars may slump amid heightened volatility, the federal government announced it will issue a US dollar-denominated bond beginning this week.
The Department of Finance on Tuesday announced plans to issue a US dollar global bond, that will be available to investors as early as April 20. In line with the government’s pledge to keep liquid foreign reserves at 3% or higher of nominal GDP, the issuance is expected to provide an additional source of investment for bond investors, should their appetite for Canadian dollar-denominated bonds dry up in the event of heightened volatility relative to other currencies.
However, given geopolitical risks and the emergence of demand for ulterior currencies other than the US dollar, the demand for the US dollar-denominated bond, may too, dry up. But, with Russia’s ongoing transition to the gold standard, along with Russian-friendly states increasingly foregoing transactions in US dollars, demand for Canadian dollar-denominated bonds may prompt investors to return, after all. Such a move could become problematic for Canada’s economy— which is heavily reliant on commodity exports— should the Canadian dollar strengthen, though.
Information for this briefing was found via the Government of Canada. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.