March 29, 2018 - 2018 Ontario Budget
Hi, I’m Gadi Mayman, CEO of the Ontario Financing Authority. Thank you for joining me for the next few minutes.
With the release of the Province’s 2018 Budget yesterday, I would like to take this opportunity to talk about our borrowing program and provide you with an update on our borrowing plans for the 2018–19 fiscal year.
Let’s start with the Borrowing Program.
In 2017–18 we issued $33.9 billion in long-term debt. This is up from the $26.4 billion forecast in the 2017 Budget, as the Province capitalized on the continuing low interest rate environment and strong demand for Ontario bonds to prefund $11.5 billion of our 2018–19 borrowing requirement.
Approximately $21.1 billion, or 62 per cent of the borrowing in 2017–18 was completed in Canadian dollars, primarily through 23 syndicated issues and a $1 billion Green Bond issue. While this percentage was lower than the 74 per cent of 2016–17’s borrowing completed in Canadian dollars, it remains roughly in line with the target to complete approximately two-thirds of total borrowing in the Canadian dollar market.
The remaining $12.8 billion, or 38 per cent, was issued in foreign currencies. As usual, the U.S. dollar market remained an important source of funding for Ontario, with $9.0 billion issued in U.S. dollars. The remaining foreign currency borrowing included bonds issued in euros, pound sterling, Swiss francs and Australian Dollars.
To limit the impact of rising interest rates, we have issued $70.6 billion of debt with a term of at least 30 years since 2010–11, to lock in low rates. As a result, the average term of Ontario’s debt portfolio has been extended from 9.7 years in 2009–10 to 10.9 years as of December 31, 2017.
Maintaining a long average term of the Province’s debt portfolio ensures low interest rates remain locked-in for a longer period. This reduces refinancing risks and helps offset the impact of expected higher interest rates on the Province’s future interest on debt costs.
Now I’d like to move on to our borrowing plans for the 2018–19 fiscal year.
The Province’s total long-term borrowing in 2018–19 is forecast to be $31.7 billion, which is half a billion dollars less than what was estimated for 2018–19 in the 2017 Budget. As mentioned previously, this is mainly due to the $11.5 billion in pre-borrowing from the fiscal year just ending, which allowed the Province to reduce its 2018–19 long term borrowing. The long-term borrowing forecast for 2019–20 has also been reduced by $1.1 billion compared to last year’s budget forecast for that year, and is now projected at $36.7 billion. As a result, we will be borrowing $1.6 billion less over the next two years than we had projected at the time of the 2017 Budget.
In 2018–19, we will continue to maintain a Canadian-dollar borrowing target of approximately two-thirds of total borrowing. At the same time, we will remain vigilant for cost-effective borrowing opportunities in other currencies to relieve pressure on the domestic bond market and diversify the Province’s investor base. This helps to reduce the Province’s overall borrowing costs and ensures that we will continue to have unhindered access to capital if domestic market conditions become more challenging.
Over the coming weeks, we will be meeting with credit rating agencies. We will begin the 2018–19 borrowing program as early as the beginning of next week, depending on market conditions.
You can find further fiscal and economic information in the 2018 Budget on the Ministry of Finance’s website. You can also find updated borrowing information on our Investor Relations Presentation, posted on this website.
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Thank you very much for your time.