By Marta Vilar – MADRID (Econostream) – Following is the full transcript of the interview conducted by Econostream on 6 February 2026 with Matthew Emde, Director General of Funds Management at the Canadian Department of Finance:

Q: In the 2026–27 bond program, gross issuance is projected to fall to C$298 billion from C$316 billion, with reductions in the 2-, 5-, and 10-year sectors and a higher share of issuance beyond 10 years. What are the main drivers of this shift—lower funding needs, investor demand, auction performance, or a strategic decision to extend duration?

A: The 2026-27 borrowing program is expected to be modestly lower than 2025-26 due to lower financing needs. We've adjusted issuance across the curve with slight reductions in the 2-, 5-, and 10-year sectors. 30-year issuance is projected to remain the same, at C$24 billion, because we want to maintain some consistency in the sector. We had increased 30-year issuance in the past couple years to respond to investor demand, and the result is that the share of our long bonds—10-year and beyond—is expected to rise minimally from 34% in 2025 to 35% in 2026-27. So, I characterize this more as status quo than as a shift.

Q: You note that the 30-year benchmark range (C$28–38 billion) may be adjusted to maintain the building cycle. What market or fiscal conditions would push issuance toward the top versus the bottom of that range?

A: The plan is to keep 30-year issuance unchanged from last year. So, the benchmark ranges are just to ensure well-functioning markets by establishing regular and predictable cadences for maturities. The 30-year benchmark range adjustment may be adjusted to maintain the current benchmark building cycle.

Q: Your framework guidance runs through March 2027. How flexible is this path in practice, and under what circumstances would you materially alter auction sizes or frequencies mid-year?

A: We are always trying to provide markets with predictability and transparency. So, we provide guidance, but if there are material changes to the economic or fiscal environment, we can update the borrowing plan mid-year. In the 2025 budget we said we were going to update the plan in the spring before the fiscal year starts on April 1st. And then at that point we'll let the market know of any changes to the borrowing plan. If there happens to be an increase in funding needs, we typically start at the short end with T-bill issuance, but it depends on the magnitude of the change and the duration of the expected shock.

Q: Where along the curve is investor demand the strongest now?

A: I would say we see strong demand across the curve. To look at some of our auction statistics in the 2025-26 fiscal year, the auction coverage has ranged between 2 and 2.5 times across the 2- to 10-year bond tenors. So, demand has been quite consistent.

Q: You again target ~$5 billion in foreign currency borrowing in 2026-27. Is USD the only currency under consideration, or could you issue in EUR, GBP or JPY if relative costs move?

A: We remain focused on issuing USD global bonds. The reason is the prominence of the USD in our reserve portfolio, which is at around 70%. This reflects our historically strong trading relationship with the US, as well as the prominence of the USD in trade and financial market settlements. Moreover, the markets come to expect us to issue a USD global every year around the $3 billion mark and we aim to be a predictable issuer. So, I would say that the relative cost of issuing in euro, Japanese yen, or British sterling versus USD is not a key consideration for us.

While we regularly assess our global bond issuance and strategy, we are not actively considering issuing another currency this time. However, if it were the case, the euro would be the most likely candidate, as it is the secondary currency in our portfolio accounting for 15% of assets. We did issue a euro bond in 2010, but as I said, this is not under consideration at the moment.

Q: In our interview last year, you highlighted exceptionally strong demand for the USD 5-year $3.5 billion deal. Do you expect USD demand to remain deep enough?

A: Our USD bond issuance in March 2025 was a huge success. We had the largest order book in five years, four times oversubscribed and we tightened pricing by 3bp. Like I said, we expect to be issuing a USD global bond again this year, likely in the spring, as is our habit. And yes, we absolutely expect to see strong demand again. The SSA market is showing a lot of momentum so far in 2026, continuing from last year. Unless there's some major economic shock affecting markets, we expect strong demand to persist. I think our issuance strategy also contributes to the strong demand for our USD global bond. Investors have come to expect us in the market once a year, and the rarity of that issuance helps support demand in primary and secondary markets. There are also not many other AAA sovereigns that issue in USD, so that helps.

Q: Is there any scenario under which you would consider issuing more than one benchmark global bond?

A: Not for now. We're trying to balance cost with our funding requirements and one global bond fits that balance best.

Q: Do you still treat the USD as destined to remain for the foreseeable future the dominant source of funding and the stress currency or has that assumption changed in light of recent developments?

A: That assumption has not changed. The USD’s prominence in our portfolio reflects the strong trading relationship with the US. Our government has stated an objective to diversify trade, but those things take time. So, currently and for the foreseeable future, the US will be the most important trading partner for Canada. The prominence of the USD in trade and financial market settlements is very deep in liquid markets. The purposes of our foreign reserves portfolio are to be able to support the CAD if necessary and provide a source of emergency liquidity for the Canadian government. In both cases, you need very liquid assets. US treasuries are still the most liquid. So, those factors still point towards keeping a large share of our reserves in USD.

Q: Consensus expects a gradual recovery in the Canadian economy as tariff shocks fade and are priced in, supported by fiscal policy and a consumer recovery. Is this also your base case?

A: Yes, that is broadly consistent with our view. In the Department of Finance, we rely on a survey of private sector forecasters as the foundation for economic and fiscal planning. And in the 2025 budget released in November, forecasters expected a gradual de-escalation of US tariffs but without a return to broadly open low-tariff global trade. So, a gradual recovery in 2026 is expected, supported by some stabilization in exports and a recovery in domestic demand amid lower interest rates. As the economy adjusts to this new trading environment, growth is expected to pick up to reach about 2% by 2027 and beyond.

Q: If fiscal outcomes deviate materially, for example, if the tariff war induces a recession or it widens the deficit, what is the playbook then for your issuance strategy?

A: In designing the debt program, we want to ensure flexibility to respond to additional cash needs. In the event of a widening deficit, our response is initially to absorb incremental borrowing at the short end of the curve. So, T-bills would see an increase. Then, depending on the size of the shock but also the expected duration, we look to the bond program to see how much of this we want to term up through increased bond issuance. We aim to be a predictable and regular issuer for markets. So, in the event of very different fiscal outcomes where we have to make a major change to our program, we definitely want to provide clear and timely updates to the market.

Q: With the prime minister rapidly approaching a majority government, would your strategy change in any way if he ultimately secures one?

A: No. Being a regular and predictable issuer, we follow a medium-term debt management strategy that is agnostic to changes in political conditions.

Q: With near zero to minimal population growth compressing GDP and shrinking the potential output cap, do you think that changes in immigration policy have any relevance in your strategy?

A: As I mentioned earlier, forecasters expect lower exports and business investment to be the main drag on GDP growth. But weaker population growth relative to the past years is also weighing on the economy. And that feeds through to lower revenues, which then leads to higher funding needs. However, the impact of this on our debt strategy is quite minimal.

Q: Roughly 75% of your borrowing is allocated to refinancing. How are you mitigating refinancing risks if long-end yields rise or if auction demand softens?

A: It is something we think about a lot. Our borrowing strategy always aims to find an appropriate balance between refinancing risks and the cost of borrowing. We think we have achieved this balance with an average term to maturity of around 6.5 years. That is also in line with that of our G7 peers. Investor demand in our auctions remains strong, and international investor holdings of Government of Canada debt have increased in recent years, so we see confidence there. Also, we don't adjust our debt strategy to short-term changes in yields. Our aim is to be a predictable issuer, so investors can count on Government of Canada bond auction sizes remaining stable over time even through periods of some market volatility.

Q: Prime Minister Carney committed to issuing transition bonds by 2027. In your 2026-27 program you referenced development of a framework. What milestones do you need to hit to meet the 2027 deadline?

A: The 2025 budget announced the development of made-in-Canada sustainable investment guidelines. These will identify eligible green and transition activities and then provide the basis for which the government will develop the sustainable bond framework that could support the issuance of green and transition bonds. So, the first step is the sustainable investment guidelines. They're being developed at arm’s length by the Canadian Climate Institute, working with Business Future Pathways, and some technical experts. There is the expectation that the guidance for three priority sectors will be completed by the end of 2026, and then for another three sectors by fall 2027. In parallel, we are doing preparatory work to ensure that once those guidelines are finalized, development of the sustainable bond framework can quickly proceed.

Q: Do you consider it likely that the deadline will ultimately be met, allowing for the issuance of a transition bond in 2027?

A: Issuing a transition bond in 2027 is our goal. 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.

Q: Do you currently see investor demand to be sufficient for a transition-bond benchmark, or would initial issuance likely be smaller/exploratory?

A: Looking at our green bond program, we've issued C$17.5 billion across six transactions since 2022. Each of these transactions was oversubscribed, reflecting strong investor demand for sustainability-labelled government debt. In fact, just earlier this week we issued a C$2 billion 10-year green bond. We saw very strong demand and got a final book size of C$3.4 billion, which enabled us to upsize the deal from the initial size of C$1.5 billion to C$2 billion, and to tighten pricing. So, these are all good signs, I think, of investor demand. While no transition bond has yet been issued in Canada, developments in 2025 point to growing investor interest in transition-labelled products globally. In particular, I would point to Japan: they are the first and only sovereign issuer of transition bonds to date, but they have consistently seen strong demand for their transition bonds. Our assessment at this point is that there should be solid demand.

Q: And if there is solid demand, you would more likely go for benchmark issuance.

A: That's always a goal for sure.

Q: Are there any scenarios under which you would consider resuming issuance of inflation-linked real return bonds (RRBs)?

A: Currently, we are not considering a re-introduction of real return bonds. The government undertook extensive consultations in past years on this issue. All of which showed declining demand for RRBs as well as a materially higher borrowing cost compared to our conventional borrowing. We continue to engage with market participants on this issue, and we are open to solutions that would meet both investor needs and Government of Canada needs.