This video provides a comprehensive discussion on the approaches and strategies of various financial institutions in their funding programs, focusing on the Canadian market. It features insights from representatives of the Canadian Mortgage and Housing Corporation (CMHC), International Finance Corporation (IFC), and International Bank for Reconstruction and Development (IBRD), discussing how their funding operations differ, their issuance strategies, and the impact of COVID-19 on the financial markets.

The dialogue sheds light on the tactics employed by these institutions to ensure liquidity, build investor bases, and manage their funding programs. It underscores the importance of maintaining stable issuance programs and being adaptive to market changes while also highlighting the challenges such as managing currency risks and international investor relations. Each institution shares its perspectives on working within the Canadian market, offering detailed information about their issuance preferences and investor engagement practices.

Main takeaways from the video:

Please remember to turn on the CC button to view the subtitles.

Key Vocabularies and Common Phrases:

1. agility [əˈdʒɪlɪti] - (noun) - The ability to move quickly and easily; adaptability in dealing with complex situations. - Synonyms: (nimbleness, dexterity, quickness)

And I think as we're getting that word out, it's starting to show up in the data. So, and as you said, like, you're very programmatic and you all look to issue very often.

2. concessional [kənˈsɛʃənəl] - (adjective) - Pertaining to loans that are extended on terms substantially more generous than market loans. - Synonyms: (subsidized, discounted, preferential)

IDA does more concessional lending, grants other things to focus on those needs, but the mission is the same across our institutions.

3. diversification [dɪˌvɜːrsᵻfɪˈkeɪʃən] - (noun) - The practice of spreading investments among a range of financial products to reduce risk. - Synonyms: (variety, assortment, mixture)

And with that we can get the investor diversification that we're talking about

4. programmatic [proʊgrəˈmætɪk] - (adjective) - Relating to or constituting a formalized set approach according to a preconceived plan or schedule. - Synonyms: (methodical, systematic, tactical)

As I mentioned, you know, eight times a year, still very programmatic.

5. stability [stəˈbɪlɪti] - (noun) - The quality of being free from change or variation; steadfastness. - Synonyms: (steadiness, firmness, balance)

It's much more important from a, from a stable, from an overall stability perspective that we are in, that we are in the market eight times a year with those large, those large deals.

6. liquidity [lɪˈkwɪdəti] - (noun) - The availability of liquid assets to a market or company; the ease of converting assets to cash. - Synonyms: (fluidity, solvency, cash flow)

Any specific steps you take to ensure there is liquidity when you do issue in Canadian, Canadian dollars.

7. regulatory [ˈrɛɡjʊlətɔːri] - (adjective) - Related to or concerned with making rules or controlling an activity or process. - Synonyms: (administrative, oversight, control)

I think the idea is that we want to keep the regulatory treatment between the two exactly the same

8. benchmark [ˈbɛn(t)ʃmɑːrk] - (noun) - A standard or point of reference against which things may be compared or assessed. - Synonyms: (standard, criterion, reference)

I think we can brag a little bit politely that we've been doing benchmark issuances in Canada for about 13 years with IBRD.

9. consultation [ˌkɒnsəlˈteɪʃən] - (noun) - The act of discussing something with someone in order to get their advice or opinion. - Synonyms: (discussion, dialogue, conference)

Yeah, no. Great question, Paula. So absolutely. As folks probably know, we went through a consultation process last year.

10. concessional [kənˈsɛʃənəl] - (adjective) - Offering loans with favorable terms that are more generous than standard terms. - Synonyms: (subsidized, advantageous, preferential)

IDA does more concessional lending, grants other things to focus on those needs.

CMHC, IFC, World Bank on Global Macroeconomic Challenges

So to start off, I'd like to hear from all of you, starting with you, David, about your funding program and what makes it different from your colleagues and friends, actually. Absolutely. Thanks, Paula. Thanks obviously everybody for being here today. Really, really appreciate it. I was just saying earlier, it's nice to be back in person at these things. I think coming out of COVID we all have a new appreciation for getting to actually see people. So a huge thank you to everybody for being here today and to Bloomberg.

So look, the Canada, so CMHC program, CMB program, which is the program that we run, is a $60 billion a year funding program. So Canadian dollars only. So obviously not as interesting as my colleagues here who are issuing in different currencies. I think still a pretty exciting program in Canada. We're about $265 billion outstanding. So quite a large program by global standards. I think programs played a key role in the mortgage funding market in Canada for quite a few years now, since 2001, including, I would say more recently from policy point of view, helping with create affordable mortgage supply for multifamily housing in Canada.

Okay, what about you, Flora? Yes, so first, thank you for having us. IFC is the international finance Corporation. We are part of the World Bank Group, but we do have a separate funding program, separate balance sheet. And so in terms of size, we issue about 15 billion a year, which is quite smaller than both my colleagues here. But we do issue in various markets across the globe. And Canada is one of our very important markets. Overall, we have about 60 billion outstanding. And as I mentioned, we're about 15 billion per year. In terms of what the funds go to, we ultimately issue the bonds and the funding goes to private sector companies in emerging markets. And ultimately we're trying to serve our mission, which is poverty alleviation and increasing income prosperity.

And how is that mission different from yours? No, our mission is the same. It's the same. The difference being, and I represent two issuers as well, and that's IBRD and IDA. IBRD everybody sort of understands colloquially as the World Bank, been around since 1944 and a big issuer, the funding program's between 50 to 55 billion a year. And IDA is a relatively new entrant into the capital market. It's inaugural's in 2018. IDA was initially set up as a sort of funded through donors, through sovereign donors, and it focuses specifically on the poorest countries and sort of built up a massive equity and then eventually sort of wanted to leverage and do more by accessing the capital markets. IDA does more concessional lending, grants other things to focus on those needs, but the mission is the same across our institutions.

And could you share with us your strategies for issuing bonds in the Canadian market? And how does the cross currency basis, asset liability management, the need for market opportunities? Playing to that. And also, how do you ensure there is liquidity for your product? All very good questions.

Yeah, so please go ahead. So, our IBRD, our funding program is quite large. So our Yden first goal is to stay to build as diverse of an investor base as possible. So for IBRD, we issue in anywhere between 20 to 30 currencies a year. All of that gets hedged back to dollar because our balance sheet is managed against dollar. So again, it's a matter of just staying, building as much of an investor base as you can in Canada. Canada is a very important donor to the World Bank as well. Shareholder.

We've been quite. I think we can brag a little bit politely that we've been doing benchmark issuances in Canada for about 13 years with IBRD. Yes, IBRD, Ida is yet to issue a maple bond, right? That's correct. Not for lack of wanting to. I think the idea is that we want to keep the regulatory treatment between the two exactly the same. So we haven't managed to do that for Ida just yet, but when we can do that, we'll move forward.

Any idea when that could be? No, I was hoping yesterday or last year, but no. I mean, we're working on a few things. We're just trying to get the exact regulatory treatment. I think things sometimes with government move quite slowly, and I think that's where we're kind of stuck at the moment. But in terms of the overall program just being as diverse as possible.

And what about you, Flora? What's your strategy for issuing Mako Bond? It's very similar to IBRD. However, as I mentioned before, our program is much smaller. So we have made an interesting strategic decision to not issue in euros. However, we have issued cad and we are committed to Canadian dollar issuing a benchmark at least once every fiscal year. And we have done that since 2018. And so the reason that we've stayed out of euros is that we definitely do our dollar benchmark a year, once a year or twice a year, depending. We have Canadian dollar, Australian dollar, New Zealand dollar, and of course sterling. And because again, our size is small, we want to make sure we're present in each of those markets regularly. And with that we can get the investor diversification that we're talking about.

Any specific steps you take to ensure there is liquidity when you do issue in Canadian, Canadian dollars. Yes. So we. Well, one, I think just laying the groundwork. We do a lot of investor relations in Canada. Arguably, we're very easy to, it's very easy to visit the investors of our neighbors. But by laying out the groundwork, we really then talk to investors and see what the needs are of investors. We do try to maintain a curve. It's not always EAsy given investor demand and what we need on our balance sheet if we're looking to essentially match the term of our lending program. And so I think, of course, working with investors maintaining a curve. But ultimately we do have to be MindFul of the cross currency basis which you mentioned. Having said that, we have issued Canadian dollar at or above our dollar, our US dollar curve, because of the importance of ensuring that we're frequent in the Market or relatively frequent in the market.

What would you like to add? Look, I'll put my investor hat on for a sec. I love, obviously, I love when we love seeing the SSA Maples come to market. So I think it's great for the Canadian market to have that diversity of issuance, especially if the price is right on it. It's even better. Look, with my issuer add on, I think as folks probably know at the CMB program, we are a very programmatic issuer. So we issue eight times a year. You know, we don't, we don't take an opportunistic view on it. Our view is, look, we do large benchmark issues eight times a year. We come to market regardless of what's going on in the world. You know, we issued during COVID we issued during GFC. We've issued during, you know, some of the toughest markets globally ever. I think we got a, we got a $10 billion deal done during the week. Lehman's failed. So I think, you know, that was just one of the sort of testaments to how strong this program is globally.

And I think, again, from our, you know, our approach to issuance is we always want to be there. Right. So it doesn't necessarily mean we're always going to get the best price. It's much more important from a, from a stable, from an overall stability perspective that we are in, that we are in the market eight times a year with those large, those large deals.

And I understand that overseas investors demand has somewhat faded a bit over the last year. How are you dealing with that? And are you seeing any signs of improvement? Yeah, no. Great question, Paula. So absolutely. As folks probably know, we went through a consultation process last year. It did create some uncertainty around the program. In the end, there was a great decision, I think was made to obviously keep the program. The program's actually larger than in where it had been. So again, we went from 40 billion to 60 billion mortgages funded per year now. So 50% larger.

I think what we did see last year, and it wasn't a huge surprise, was with that uncertainty, we saw a dip in our international investor base. So we saw that historically we were on 30, 35% of our primary book would go to international accounts, fell to around 20 last year. First half of the year, we were still pretty slow to recover, I would say we started seeing more accounts coming back in terms of unique names, but the percentage was still quite low. So we're around 2020, 2%, I'm going to say, honestly, we spoke to our syndicate kind of mid year point of the year, and we said, look, the international numbers were lower than where we wanted to see them. I think kudos to our syndicate in the two deals since that, we've actually seen a very nice uptick in our international distribution. So the August 10 year trade, we saw nearly 40%, which was maybe a bit of an anomaly, but quite good. And even the recent five year deal in September, we saw 25%.

So we're seeing the overall percentages coming up, which is great, I think, as we get out and speak with investors, obviously great being in New York this week, speaking to a lot of folks, just, you know, letting people know that, you know, that we are obviously still in business where, you know, we haven't changed our approach to how we issue. As I mentioned, you know, eight times a year, still very programmatic. You know, I think as we're getting that word out, it's starting to show up in the data.

So, and as you said, like, you're very programmatic and you all look to issue very often. So no matter how bad or good things are, you are out there. And how do you navigate central banks that are not as synchronized as we would have hoped and your international investor base shrunk a bit. So how do you navigate these markets? And what kind of actions do you take in terms of sizing of the deals or maturity or what do you do? So I think for, look, I think for us, I actually think we're somewhat agnostic on that, as strange as it sounds, and I did sort of allude to it earlier, that we really are all about that, get to the market eight times a year. And again, it's obviously, I always care about price as an issuer but we are somewhat agnostic to that. It's much more important that we get to the market. Our syndicate truly works very hard and I believe the model we use I think is quite effective because the syndicate sales desks work extremely hard to build very strong, robust books.

We're generally very predictable in terms of the size of our deals that are coming. So syndicates will build those books in advance. So we're quite comfortable with those levels. And I think we just need to demonstrate to the market that we're going to keep doing that. Nothing's changed. What about you flora? Yes, so we have a global presence with our funding team. So we have people in Singapore, in London, a person in Japan and then of course in Washington DC. And what we do is basically on a daily basis we're coordinating and monitoring the various markets to see what makes sense in terms of pricing, investor demand and the like.

And I think what we do is we look at that, but we also look at the needs of our liquid, our, our other side of the balance sheet, our asset side, our rpms having opportunities to invest. The funds that we issue sits in liquidity before it's dispersed to our clients. And so I think looking internally with our asset side, coordinating amongst the team, we then ultimately look for the best opportunities with what we talked about earlier, with the idea of ensuring that we're still in each market frequently enough to remain liquid and recognized by investors.

The last time you issued was in August 2023. So you haven't issued this fiscal year yet? That's right. Does that mean that demand is not quite there yet? I would say right now it is more of a cross currency basis. The last time I looked this morning, I think we're probably five basis points away on the five year point. Last year or not last year. Last fiscal year when we did issue our Canadian dollar, it was a green bond. It was a billion in size, which was the largest we had ever done at that point. And it was three year. And so if we were to look this year, which we are looking, we would potentially look to go a little longer.

We do believe that the Canadian market, the investors are very interested in sustainably labeled bonds. So whether it's green or social, that is something we'd absolutely consider as well. Should we expect an issue over the coming months then? Because you're pressure, pressure is on. No, like I said, we are very much committed. And if it's slightly above our dollar curve, we can live with that. And ultimately, like I said before, we also look at the asset side. If there are assets that can be, our PM's can be investing in. We're looking ultimately at the spread. So yes, I am very hopeful that we will issue this fiscal year.

So do we expect some issuance from one of your two entities as well? In Canadian. We would love to issue in Canadian dollar denominated bonds as much as is feasible and we've made that a priority. We were able to do a 1.4 billion in January. We've been monitoring since, still little offsides in trying to get that done, but we keep monitoring that and January always somehow tends to work somehow. So we can certainly look towards that and do as much as we can.

And when you mentioned the international investor demand is getting up there, any kind of specific investors like region wise or sort of type of investors that are particularly interested in Canada these days? Yeah, so look, we've seen the pickup we've seen this year I would say has been us based. So obviously a lot of our friends here in New York, it's been great to see those numbers come back up. I'd say Europe has also been quite good for us this year. So we've seen a nice, really nice resurgence out of Europe. We have done some targeted investor relations into those areas.

I do find that works. Right. Just getting in front of people, particularly the central banks, often with sometimes the CAD portfolios, you'll have PM's turning over in those fairly regularly. Getting in and talking to the new folks is quite important and it does deliver orders. So yeah, it's been quite positive on that front. And would that make any sense for you to issue in different currencies? So for us, we're strictly Canadian dollars. So we're not set up to issue in any other currencies. We have no intention of issuing in other currencies. I think at the end of the day, as I said earlier, the policy mandate of this program is to support the Canadian housing finance system, the stability of that, which obviously is a Canadian dollar system. And again, I think the program's proven to be able to do that fairly efficiently in Canadian dollars.

So there's really no need to look at other currencies. And I think again, from that policy point of view, it's also been extended now to the, to really put a push on with the affordable housing issue in Canada and really trying to fund more multifamily housing. So if we look at the increase last year that the government gave us, that incremental $20 billion is directed solely towards multifamily housing, which for anyone that's in Canada, they realize that housing affordability has become very big issue. So you know, this program has been, you know, doing its small part to, to certainly help with, to help with that.

At least give up talking about supporting the domestic market. How do you see the big pension funds issuing more and more often in the domestic market and does that have any influence on your decisions? Yes. So I was listening to the panel earlier and I think a lot of the goals that CD PQ and Ontario's have, it's very similar to ours. Right. Investor diversification and of course the pricing and whatnot. And I don't think, I think there's enough demand at least currently to service all of us. We are I think complementary to the pension funds and whatnot rather than a direct competitor. So I think ultimately with more issuers it will create more interest in Canadian dollar, in the Canadian dollar market.

How do you see this? Yeah, I mean I know it's been, it's been the last couple of years it's been, you know, higher and I kind of expect that to stay pretty, you know, pretty static going forward. I don't, I don't think that really would affect demand for a maple issuance. I think it's really more just getting the pricing right for us because I sense that there would be certainly interest if that works for us. So I don't see it really affecting the demand for an IBRD issuance at all.

What about you? Yeah, look, we love diversity of issuance in Canada for sure. I think it's great to see the pensions active again. We love seeing the ssas bring maples. I really think the more of that issuance is happening. It's beneficial for all of us as issuers.

Much has been said about quora as a floater and I wanted to hear from you guys. What are your views and what is the importance of pre selling bonds to make sure such an issue could actually happen? Yeah, sure. Well, I mean for us again, part of the diversification story, we like to do as many different instruments as we can. We like to try to be innovative. So a quora issuance I think would be great. I mean for us, we'd like to sort of lend or show support to these new sort of financial benchmarks and we did that with dollar sofer as well.

We were the first benchmark issuance in dollar sofer back in 2018. Today we've issued about 25 billion of dollar SoFR. And at the beginning it was very nascent and new. That's really developed into a pretty significant market now. And so for Quora, I think we'd love to take the same opportunity. I know we've looked at it, we keep looking at it. I don't see any reason it'd be something, it would be right up our alley to try to support something like that.

So maybe your next issues could be courage. Could be. We'll see. What about you, Flora? Yeah, I would say we probably want to walk before we could run. So we do look to our big sister, if you will, to issue the Quora. Having said that, we have seen investor interest. When we go to the meetings that we've had, particularly in Canada, there has been interest in Quora. So it's something that we definitely keep an eye on. But I would say it is not immediately in our funding, I guess, options at this point.

Yeah. So look, or for us is, you know, we were fairly heavily involved in the transition. You know, I think we're sort of considered the only, the only regular core issuer in Canada. And I think, you know, we do take that role quite seriously. I think, as folks may or may not have heard, we are going to make a slight change to our program next year, not in terms of necessarily the sizing, but we will likely only do the Quora two times per year, next year instead of four times. So, you know, expect to see, you know, less frequent issuance.

But I would say sizing very similar to what we've been, what we've been doing in total before. Why this adjustment? Look, I think it's, you know, a function of the, you know, the order books. We know it is a, you know, it is a very specific, specific investor base on it. So we don't generally see a lot of depth in those books. But the investors, those investors do generally show up on those trades. So try to target larger, more liquid, more liquid deals. So do that twice a year instead of spreading them out over four. So just help with the liquidity a little bit, make for a little bit bigger benchmark sizes.

And if I can just add, if we're looking at the current interest rates and the direction they're going in, it could also impact the demand in the product as well. Okay, well, the time is shouting at us, so I'd like to thank all of you, and that's it. Thank you very much.

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