Based on a new report from National Bank’s Warren Pretty, international buyers absorbed about 60% of all newly issued federal debt throughout the 2024–25 fiscal yr.

That’s a document quantity—$91 billion price of Canadian T-bills and bonds bought by non-residents over 12 months—and sufficient to boost severe questions on who’s actually propping up Ottawa’s borrowing wants.

“Non-residents don’t get to vote in Canadian elections; nor do they occupy seats in Parliament. However international buyers have ample alternative to precise their view on the federal government’s chosen course,” Pretty factors out. “If displeased, they might cease shopping for and/or demand comparatively fatter yields and/or steeper curves to remain concerned.”

A rising reliance on offshore consumers

The share of federal debt held by non-residents has climbed sharply lately. As of March, international buyers owned $512 billion in Authorities of Canada debt, about 36% of the entire excellent. That’s properly above the historic common of 23%, and simply shy of the all-time excessive reached in late 2024.

This rise in international participation has been a web constructive in lots of respects, having added liquidity to the home bond market and helped Ottawa finance its rising deficits with out overwhelming home buyers, Pretty notes. Patrons span a large spectrum—from central banks and sovereign wealth funds to insurance coverage corporations, pension funds and fast-money hedge funds.

However because the Bank of Canada famous in its newest Monetary Stability Report, there are additionally dangers. Many of those buyers are utilizing leverage, and a few may retreat rapidly if circumstances change or their danger tolerance shifts.

A sudden pause, then indicators of life

Curiously, regardless of the document tempo of international shopping for over the complete fiscal yr, the ultimate quarter informed a special story.

From January to March 2025, non-residents didn’t add a single greenback of web new federal debt to their portfolios. That left home buyers to take in all of Ottawa’s new issuance—essentially the most they’ve taken on in a single quarter for the reason that pandemic-era borrowing spree of mid-2020.

The timing wasn’t perfect, as these months noticed a flurry of U.S. tariff threats, a risky Canadian greenback, and political uncertainty forward of the April federal election. “It could be that sure non-residents merely backed away early within the calendar yr in hopes the image would clear,” Pretty wrote.

There’s already some proof that the pullback could also be momentary, nevertheless. Nationwide Financial institution factors to contemporary knowledge displaying non-residents had been answerable for about 30% of Authorities of Canada bond and T-bill buying and selling volumes in April—outpacing even home banks and institutional shoppers. They’ve additionally been profitable bidders in latest bond auctions, taking down roughly one-quarter of latest provide for the reason that new fiscal yr started.

Why this issues for debtors and markets

At a time when Ottawa is anticipated to extend its borrowing—and not using a funds but in place, however with marketing campaign guarantees pointing to larger deficits—the federal authorities will proceed to rely closely on demand for its bonds.

If international urge for food fades or turns into extra selective, it may pressure bond yields larger to draw sufficient consumers. That, in flip, would enhance the federal government’s borrowing prices—and will affect all the things from mounted mortgage charges to broader monetary circumstances.

As Pretty places it, “Ottawa should guard in opposition to budgetary complacency.” Canada should look strong in comparison with a few of its friends (the U.S., for instance, simply noticed a downgrade), however world buyers have selections—and expectations.

Whether or not or not they’re within the room, international buyers could find yourself holding extra sway over Ottawa’s fiscal future than the opposition bench.

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Final modified: Might 28, 2025