By Marta Vilar – MADRID (Econostream) – Canada is “working hard” toward issuing a transition bond in 2027, with the intention of making it a benchmark deal, according to Matthew Emde, Director General of Funds Management at the Department of Finance.

In an interview with Econostream on 6 February (see transcript), Emde described demand across the Canadian government bond curve as “strong” and “quite consistent,” noting that auction coverage in the current fiscal year had ranged between two and two-and-a-half times across the 2- to 10-year maturities.

On plans for a new USD benchmark bond in 2026, Emde said Canada expected to return to the market and that the transaction would “likely” take place in the spring. “And yes, we absolutely expect to see strong demand again,” he added, referring to the 2025 USD global bond.

The Department of Finance is not actively considering issuance in currencies other than the Canadian dollar and the US dollar, he said, although the euro would be the most plausible alternative if that were to change. A euro bond, however, is not “under consideration at the moment.”

There was currently no scenario in which Canada would issue two USD benchmark bonds in the same year, Emde said.

Turning to the economic outlook, he said the Department of Finance expected a gradual recovery, supported in part by stabilizing exports and a rebound in domestic demand as interest rates declined.

“As the economy adjusts to this new trading environment, growth is expected to pick up to reach about 2% by 2027 and beyond,” he added.

Asked whether Canada would meet the 2027 deadline for issuing a transition bond set out by Prime Minister Mark Carney, Emde said that launching the instrument next year remained the objective.

“While there are a number of things that need to fall into place first, we are working hard so that we can issue in 2027,” he said.

Citing strong demand for sustainability-labelled Canadian debt and rising investor interest in Japan’s transition-labelled products, Emde said the Department’s assessment is that demand for a Canadian transition bond “should be solid.”

Making the deal benchmark-sized, subject to sufficient demand, was “always a goal,” he added.

As for a potential re-introduction of real return bonds, Emde said this was currently not under consideration.