Ontario to favor home bond market, wary of Europe

Tue Mar 27, 2012 8:07pm EDT
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By Claire Sibonney

TORONTO (Reuters) - Ontario will look to the local Canadian-dollar bond market to meet most of next year's funding needs, but expects to borrow less at home than the 81 percent it did this year, the chief executive of the Ontario Financing Authority said.

Gadi Mayman, speaking ahead of the release of the provincial budget on Tuesday, said Ontario was able to easily tap the local market to fund 81 percent of the 2011-12 borrowing requirement due to a strong international appetite for Canada's high-flying currency, the country's sound fiscal reputation and higher yields than federal debt.

The province said its long-term public borrowing need for the current fiscal year was C$34.9 billion ($xx billion), a decrease of C$100 million from the estimate last spring. Borrowing needs for subsequent years have also drifted down from previous estimates due to lower deficits.

Still, Mayman acknowledged the province's vulnerability to global risks.

"What keeps me up at night in the financial markets is … Europe and while Europe is for the moment looking fine I just worry about what goes on with that and whether it has any contagion effects in international markets," he said.

"To a large degree we follow global sentiment, it's a very integrated global marketplace and there's no place to hide anymore, so if things go very badly wrong in Europe there's no doubt it will have an impact on us."

The province aims to borrow at least 70 percent at home in 2012-13, closer to historical levels of three quarters, but that will depend on market conditions, and in particular where it's least expensive for the province to borrow.

Ontario - the world's seventh largest non-sovereign borrower - issued 59 percent of its debt in the domestic market in 2010-11 and 51 percent in 2009-10 near the height of the global financial crisis.   Continued...