April 15, 2020 / 6:46 PM / in 3 months

WRAPUP 2-Canadian dollar, bond yields slide as BoC broadens quantitative easing

 (Adds strategist and central bank quotes, details throughout;
updates prices)
    * Canadian dollar weakens 1.5% against the greenback
    * Canada's economy shrinks by an estimated 9% in March
    * Bank of Canada says it will buy provincial and corporate
bonds
    * Canadian bond yields fall across a flatter curve

    By Fergal Smith
    TORONTO, April 15 (Reuters) - The Canadian dollar slumped to
a one-week low on Wednesday and domestic bond yields tumbled as
the Bank of Canada added to the suite of assets it is purchasing
to cushion the economic blow of the coronavirus pandemic.
    Canada's central bank kept interest rates steady at 0.25% as
expected and added provincial and corporate bonds to its
asset-purchase, or quantitative easing, program.             
    "There has been some improvement in market functioning. But
important strains continue, and Governing Council acknowledged
that near-term borrowing requirements of governments and the
private sector are likely to pose further challenges," said Bank
of Canada Governor Stephen Poloz, who is due to step down in
June.
    Since the start of March, the BoC has slashed interest rates
by a total of 150 basis points, in a series of emergency moves,
and begun buying at least C$5 billion of government bonds per
week, while Ottawa is rolling out more than C$200 billion of
fiscal support.
    "The BoC and the government continue to deploy the
proverbial policy bazooka to support the economy, with
assurances that more will be added if needed," said Ryan Brecht,
a senior economist at Action Economics.         
    Canada's economy shrank a record 9% in March from the
previous month as the coronavirus outbreak forced the shutdown
of economic activity during the month, Statistics Canada said in
a flash estimate.             
    "The goal has to be to provide a cushion for businesses to
bridge the gap until the economy can be reopened," said Greg
Taylor, a portfolio manager at Purpose Investments.
    Canadian government bond yields fell across a flatter curve,
with the 10-year down 11.8 basis points at 0.640%.
    Yields on Canadian provincial bonds fell by even more, with
the oil-producing province of Alberta seeing its 10-year
borrowing cost tumble by about 30 basis points to 1.758%.
    The Canadian dollar          was trading 1.5% lower at
1.4090 to the greenback, or 70.97 U.S. cents, its biggest
decline since March 18. The currency touched its weakest
intraday level since April 7 at 1.4130.
    The Toronto Stock Exchange's S&P/TSX composite index
          closed down 2.1% at 13,958.58, pulling back from a
one-month high on Tuesday. The heavily weighted financial sector
fell 3.4%, while the energy group was down 5.3%.
    "Until oil regains its footing, Canada could underperform
(U.S. markets)," Taylor said.
    U.S. crude oil futures        settled 1.2% lower at $19.87 a
barrel after the United States reported the biggest weekly build
ever in inventories.             

 (Reporting by Fergal Smith; Editing by Bernadette Baum and
Peter Cooney)
  
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below