Bond Club’s Newest Member Is One of the Emptiest Places on Earth

(Bloomberg) -- The Government of Northwest Territories, which encompasses a sparsely-populated patch of land twice the size of France, took advantage of cheap borrowing costs this week with a debut sale in the Canadian dollar public debt markets.

The government raised C$180 million by issuing bonds due in September 2051 on Tuesday, according to data compiled by Bloomberg. The securities, benefiting from a Bank of Canada program to purchase provincial debt to provide more liquidity in financial markets, were priced to yield 2.23%.

The Northwest Territories, north of Alberta and sandwiched by the territories of Yukon and Nunavut, holds the second highest investment-grade rating at Moody’s Investors Service. Pressured by an aging population and a narrow economic base concentrated mainly in the diamond industry, the province gets close to 70% of its total revenues from the federal government, Moody’s said in a July report.

The government “will use the funding mainly to reduce short-term debts used to fund various longer-term capital projects,” said Todd Sasaki, a press officer for Yellowknife-based government. “A portion of this issuance will be provided to the Northwest Territories Power Corporation to assist in funding their capital plan.”

Northwest Territories has an expanse of 1.14 million square kilometers and it’s the home of around 42,000 people, according to Canada’s government data. Mark Carney, the former governor of both the Bank of Canada and Bank of England, was was born in the region.

The bonds were priced to yield 115 basis points over similar duration government securities Tuesday and are quoted at around 116 basis points Thursday, according to Bloomberg data. That compares with a spread of around 86 basis points on 2051 bonds issued by Ontario, the world’s largest sub-sovereign debt issuer.

While the government itself hasn’t issued bonds before Tuesday, its power company has some existing securities, which have been eligible under the central bank’s provincial bond program. It’s one of the measures established earlier this year to support financial markets after the Covid-19 pandemic caused risk premiums to widen to record levels.

The Northwest Territories “may issue bonds in the future to fund any large capital projects or on behalf of the NWT Power,” Sasaki said in an email replying to questions.

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