06:37 AM EST, 12/17/2024 (MT Newswires) -- Canada's federal Debt Management Strategy (DMS) was never going to live up to the political drama that unfolded throughout Monday with the resignation of the finance minister, but it did have its own highlights, said Desjardins.

While many expected the federal government to run larger deficits, last year's "lofty" C$61.9 billion shortfall came as a "big surprise," noted the bank. Deficits going forward are expected to remain wider, resulting in a greater need for borrowing.

Debt issuance is also expected to remain elevated thanks to the heavy upcoming maturity profile, pointed out Desjardins.

The borrowing program for fiscal year 2024-25 has been upsized by C$36 billion, with the additional issuance spread across the curve. The updated DMS has bill issuance rising 8%, or C$23 billion, accounting for 55% of the total debt issuance for the year. That's just slightly above the 54% expected in Budget 2024, stated the bank.

The bond program is increasing by C$13 billion to C$241 billion, up from the C$228 billion previously expected. That bond issuance will be spread across the curve.

There will be an additional C$6 billion in two-year, C$3 billion in five-year, C$3 billion in 10-year and C$1 billion in 30-year bonds. That leaves their relative shares of total issuance almost unchanged.

Auction sizes are rising to accommodate the larger borrowing program. The two-year sector will also see another auction added to the schedule given the tight calendar between now and the end of the fiscal year to conduct the issuance. Separately, a review of the one-month bill is planned for 2025 following the trial of the program.

The new issuance profile hasn't changed the outlook for public debt charges all that much, added Desjardins. These debt charges are still expected to sit at 1.8% of GDP for this fiscal year.

While that's unchanged from Budget 2024, it's in part because interest rates on public debt are forecast to be 10 basis points lower than previously anticipated. Public debt charges as a share of the economy remain below those in peer economies.