35% of outstanding Canadian government debt is now owned by the central bank.
After a year in which the Bank of Canada dramatically expanded their balance sheet by purchasing over $250 billion worth of government bonds, the central bank is looking to scale things back somewhat.
According to a BNN Bloomberg report, “Deputy Governor Toni Gravelle used a Tuesday speech to lay out ground rules the central bank will use to slow the pace of its purchases of Canadian government bonds. The quantitative easing program has been a key tool policy makers have used to keep market interest rates low since the pandemic hit a year ago.”
Note that part specifically – “a key tool policy makers have used to keep market interest rates low since the pandemic hit a year ago.”
This has been the case for some time (long before the pandemic), with central banks suppressing interest rates, thus incentivizing massive accumulation of government debt while cushioning politicians and others from the consequences of that debt.
Of course, that only means the inevitable reckoning is worse.
As you can see below, the expansion of the Bank of Canada balance sheet is far beyond most other countries:
The Bank of Canada ‘scaling back’ at this point is like shutting the barn door after the horse has bolted.