Desjardins Says Bank of Canada Steps Back Into Canada T-Bill Market

12:35 PM EST, 01/14/2026 (MT Newswires) -- Bank of Canada resumed routine Canada T-Bill (CTB) purchases in December to keep pace with currency growth and maturing bonds, aiming to restore a balanced mix to its bond-heavy balance sheet, said Desjardins.

Based on its stated steady-state operating framework, holding a mix of T-bills, Government of Canada (GoC) bonds, and term repos to match floating-rate liabilities, the bank estimates the BoC could accumulate about $50 billion in CTBs by mid-2027.

With the debt management strategy forecasting around $290 billion in outstanding CTBs over the year, that implies a roughly 15%-20% ownership stake, broadly consistent with the BoC's pre-pandemic footprint, stated Desjardins.

The last time policymakers expanded their CTB holdings (2016-2018), non-residents quietly packed their bags, wrote the bank in a note to clients. During that period, the BoC's ownership share rose 10 percentage points, offset by declines in CTB holdings of chartered banks, mutual funds and foreign investors.

Banks were the main sellers back then but today their CTB positions are already quite lean, making further reductions less likely, pointed out Desjardins. Non-residents, however, currently hold elevated amounts and appear to be prime candidates to lighten up in 2026.

As of Q3 2025, non-residents owned just over 100 billion CTBs, a record high in dollar terms, and just shy of a record high when normalized by outstanding.

During that same 2016-2018 period, non-residents didn't just sell CTBs. They reallocated into Canadian corporate and to some extent provincial paper, added the bank. Their ownership of other money-market securities rose noticeably over the period.

The pattern was clear: as the central bank moved deeper into the CTB market, international investors shifted demand toward other Canadian dollar short-term instruments.

The BoC's return to the CTB market will likely reshape ownership shares significantly this year, according to the bank. While the BoC may crowd out the share of non-residents, Desjardins doesn't expect this to lead to large capital outflows.

The 2016-18 experience suggests non-residents may simply roll into provincial or corporate bonds. The read-through to spreads is less clear, although these dynamics should put downward pressure on CTB yields and spreads, it noted.

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