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It's raining bonds Add to ...

Canada will set a dubious financial record in the coming fiscal year by issuing more government bonds than any other period in the country's debt-soaked history.

The federal budget projects a record $82-billion in federal debt will be flogged in fiscal 2009-2010, up 7.9 per cent from the current year and double what was planned in last year's budget.

To move all this paper into the hand of investors, TD Waterhouse explained in a note Wednesday that the Finance department plans to boost the amount of Treasury bills outstanding by 15 per cent to $223-billion, from $194-billion. The size bi-weekly auctions for 3-month, 6-month and 1-year T-bills will be boosted.

There will be new vintages of bonds, as TD Waterhouse said that Ottawa will return to selling  bonds that mature in three years - they haven't been seen since 1996. The investment dealer said: "On a disappointing note for the bond market, the new 3-year bonds will have March and September maturities, so they won't be fungible with existing issues."

The successful Canadian Mortgage Bond program will also be deepened, with the federal agency adding a new 10-year maturity to its arsenal as it buys more mortgages from financial institutions.

Of course, we're barely getting the printing presses rolling compared to the debt pouring out of other industrialized nations. Goldman Sachs estimates the U.S. government  "will borrow a record $2.5-trillion (U.S.) this fiscal year ending Sept. 30, versus $892-billion in notes and bonds during the prior 12 months."

In a terrifying bit of trivia, TD Waterhouse noted that on Wednesday, "The U.S., Europe and Japan sold at least $87-billion of government debt during the session, exceeding the total amount the U.K. government raised for the whole of its 2007-08 fiscal year."

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