Bloomberg BusinessWeek

Quebec Austerity Makes Bonds Tops Among Provinces
Bloomberg BusinessWeek

Quebec’s vow to balance its budget for the first time in six years is looking a lot more credible in the eyes of bond investors. The yield investors demand to buy Quebec 10-year bonds has dropped to 2.2 percent from 3.5 percent a year ago, reducing the premium to the federal government to the least since 2013, Bloomberg pricing data show.

Quebec bonds are also outperforming provincial peers as Finance Minister Carlos Leitao pledges spending cuts, a civil-service freeze and higher fees for the province’s much-vaunted daycare system amid a government drive to balance the budget in 2015-16. Quebec’s austerity drive belies its reputation as one of Canada’s biggest spenders and contrasts with Ontario, which isn’t projecting a balanced budget until 2017-18.

“There are very strong elements helping to support the Quebec name in the markets,” Marc Rouleau, a fund manager at Manulife Asset Management in Montreal, said in a telephone interview. “Good fiscal policy, a believable government, excellent supply-and-demand dynamics and a trading partner that seems to be doing increasingly well — all of this provides greater confidence for the outlook of the province.”

Yields on Quebec bonds relative to federal government debt have narrowed by nine basis points this year, or 0.09 percentage point, to 74 basis points as of March 9, the best performance among provinces included in the Bank of America Merrill Lynch Canadian Provincial and Municipal Index.

Qu’on aime ou pas les libéraux, les faits sont là et le verdict est sans appel. Quand le PQ dirigeait le Québec, nous étions vus comme une province de cabochon par les marchés financiers. Depuis que les libéraux sont là, nous sommes devenus la meilleure province au Canada !

C’est une preuve indiscutable que l’austérité fonctionne, c’est probablement pourquoi nos bons médias n’ont pas parlé de cette nouvelle…