Best Exchange Rates For US dollars: Canadian Government Launch Rare US Dollar Bond.

June 18th, 2012

Best exchange rates for US dollars – the Canadian government have released a rare $3 billion dollar bond which is the first of its kind since 2009.  The decision was aimed at cashing in on Canada’s rather favorable position as one of the few countries in the world that is considered a very safe haven in these uncertain economic times. As predicted the bonds were swiped up in record time by banks and as the countries borrowing reached an all time record breaking low gobbled up by central banks and fund managers, pushing the country’s borrowing costs to record lows.

Canada, although not widely documented and covered in the press, has become an investor’s haven over the last couple of years as trouble sweeps through the euro zone and question marks remain over the financial policies of the US.  Canada is in a very favorable position, it is now the third largest issuer of sovereign debt rated AAA by the main credit ratings companies. Up there with Canada is the UK and Germany, America and France were downgraded in January 2012.

Offers for the recent release of US dollar bonds by the Canadian government actually exceeded what was available by a ratio of 3 offers to 1 bond available which will have an impact on the best exchange rates for US dollars.

The eagerness of investors to get their hands on these bonds clearly demonstrates the countries high profile and standing among investors and the strength of its overall economy. If Canada’s debt position is compared to that of the UK it helps to understand the strength of their position,  Canada’s overall federal debt stands at just over $600 billion; the UK debt stands at over $1.8 trillion! Canada’s Finance Ministry has reported that they will use the bond sales for foreign exchange holdings. Canada’s attraction is largely part of the allure is Canada’s sterling fiscal position. The nation’s Conservative Party won a majority mandate last year, campaigning in part on a pledge of fiscal prudence.

It presides over one of the lowest percentages of debt as a share of gross domestic product in the developed world, 34.6% for fiscal 2012, compared with just more than 100% in theU.S.Still, the government has pledged to cut further in an effort to balance the budget by the 2015-16 fiscal year.

“Canada looks very good, in terms of the net-debt situation that we have, compared to other countries,” said Patrick O’Toole, vice president of global fixed income for CIBC Asset Management.

Edward Devlin, executive vice president and head of the Canadian-portfolio management team at Pacific Investment Management Co., one of the world’s largest asset managers, said the firm’s holdings in Canadian bonds are bigger than Canada’s footprint in financial markets would dictate, with $11 billion of its $1.4 trillion under management invested in Canadian assets of some sort. Big institutional investors, including central banks, would gobble up more Canadian bonds if there was the supply, he said.

“If you are China, if you are Middle Eastern money, if you’ve got a trillion or multiple trillions of dollars, you can’t deploy it in Canada. It’s just not big enough,” Mr. Devlin said.