Canadian governments are borrowing like a pandemic just broke out—and banks are snapping up the debt at historic levels. Statistics Canada (StatCan) data shows net issuance of government securities surged in Q2 2025, marking the biggest quarter since pandemic supports peaked. More concerning: domestic banks are absorbing the demand, a pattern rarely seen outside of looming credit risk events. The buying spree may lower short-term borrowing costs, but it’s likely fueling the record capital flight now undermining long-term growth prospects.
Canadian Government Borrowing Surges To Highest Since Pandemic
Canadian government net issuance: Quarterly change in total government debt raised through net new securities.
Source: Statistics Canada; Better Dwelling.
Canadian governments are borrowing like the country is in crisis—despite talk of austerity. Net issuance hit $71.3 billion in Q2 2025, up 53.3% (+$24.8 billion) from Q2 2024. It was the largest quarter since Q2 2021, during peak pandemic stimulus.
The federal government accounted for $38.1 billion of the total, up 346% (+$29.6 billion) from a year earlier. The jump looks extreme, but Q2 2024 was unusually low due to maturing debt, creating a base effect. Still, this quarter was on par with 2020–2021 levels, when Ottawa was funding extensive pandemic relief like CERB.
Provinces and territories weren’t exactly cutting back either. Their net issuance reached $32.6 billion—down 14.9% (-$5.7 billion) from last year, but still the fourth-largest quarter since 2019.
Canadian Banks Buy Record Government Debt—That’s A Big Red Flag
Adding to the ominous tone is the buyer: Canada’s banks. Chartered banks set a new record for federal bond purchases in Q2 2025—surpassing the all-time high set just a quarter earlier. Banks typically hold some government debt, but back-to-back records suggest this is far from routine.
The demand points to banks parking capital and hedging against credit risk. Weak private credit demand signals households and businesses are pulling back—a common precursor to slower investment. As lending shifts from the private to the public sector, growth is increasingly financed by government debt. This crowding doesn’t just reflect economic anxiety—it reinforces it. Banks are no longer intermediating private growth; they’re underwriting public borrowing.
When bond absorption depends on domestic banks, risk becomes concentrated and price signals fail. Credit spreads no longer reflect true risk, yields disconnect from inflation, and borrowing costs are artificially lowered—temporarily. That may ease financing now, but it erodes investor confidence over time. A healthy bond market depends on diverse capital providers—foreign and domestic. This shift likely deepens the record capital flight already underway, undermining confidence in Canada’s long-term outlook.
” Introducing my husband , The PM of Canada , who will build Canada Strong, and Canada Poor”
The CERB point hit harder than it was probably intended. Think about it—more than half the country stayed at home, there was no tourism, slim exports, and every had a financial safety net.
Still cheaper than the scam being run right now, and we somehow need to cut government staff. Where’s the firkin money going?
Didn’t you say on X that there’s about $600b in refinancing coming up too? Never underestimate how much leaders will plunge the economy to blame the last guy then pretend they fixed it by making it marginally better than it was when they took office.
Canada is facing a generational recession here. There is a hard landing in housing underway, govt, corporate and govt debt at the top of the charts globally, and capital leaving Canada as fast as it can. Add to that no net new capital formation for ‘major projects’, unemployment rising, and inflation still out of control.
Now the problem is, the new PM, who was the old PM’s econmics guy for at least 5y, is just continuing the same bad policies that got us here. If you are insolvent, in debt up to your neck, and taking an advance on your visa to pay your MC, do you keep making large purchases?
Yesterday, when PP asked Carney about the economy and inflation, Carney responded with the 500+B he has spent since taking office? Is any of this going to create jobs, improve the GDP, or …. Giving hundreds of Billions to build garbage housing (tiny apartments no one wants) is not going to cut housing prices or rent. Spending hundreds of Billions for new guns or tanks isnt going to help unemployed Canadians.
The problem is, Carney is a one trick pony. Since 2008, his approach has always been to exponentially expand the money supply via private bank mortgages. The problem with that is, you cant do that forever. Why not? Well as Canada and the UK are learning, when you use bad monetary policy to double or triple housing prices, it not only leads to a massive increase in poverty, inflation, and debt, it puts the govt in danger of insolvency.
As of today, Carney is running a massive ponzi scheme in the CHMC. Instead of using the CHMC to control housing prices in 2020 or earlier, he and his dim sidekick freeland used it to accelerate the increase in prices, the exponential growth in the M34 money supply, and drive capital to residential real estate, and away from productive investments. This led to 4 things:
1. Inflation. contrary to the pure nonsense spouted on the news and by politicians,. the reason for systemic inflation is always an excess supply of net new money. Since 97% of our money is sourced by banks making money to lend out, that is the root cause of our, the UKs and the G7s inflation problems.
2. With residential real estate driving 20-30% annual returns, investing in productive enterprises that create exports and GDP doesnt seem to make sense, so they dont do it. This leads to lower GDP per capita, and lower standard of living. In Fact our standard of living has fallen more under Trudeau / Carney than in the Great depression, and almost 90% compared to the USA. It is, by far the worst performing government in Canada’s history.
3. Using crown corporations to take ever more risky investments in residential real estate finance and development has created a massive, unfunded liability for the taxpayers. The CHMC keep less than 10% of its potential claims in reserve, giving the rest of their revenue to the govt as a divdend. If prices collapse 50% from here, we could see at least another $1Tr added to our national debt. Then there would be the BDC, EDC, CDIC, and various provincial organizations who would need even more money.
4. Lastly, this brings us to the govt debt. Currently 4 of the 7 G7 countries are in serious trouble with their sovereign debt. Canada, France, UK, Italy are all closing in on unsustainable debt, and may need IMF intervention if their bonds cant be sold to anyone but domestic private and central banks. This is because if a domestic bank buys govt bonds, it doesnt ‘have’ the money to buy them, 95-97% of that money is created to buy the bonds. This creates an inflationary spiral, and then rates go up. If rates have to go up because no one wants to buy Carney’s bonds (what is being described above) then the dollar will collapse in value, and we will need the IMF to impose austerity, like what happened in Greece.
So given the mess that has been coming for years now, one should ask how is the same govt who made this mess still in charge? Good questions isnt it?
CANADA WILL BE CHASING IT’S TAIL FOREVER
THE COUNTRY HAS BEEN ABANDONED BY WORLD AND DOMESTIC INVESTORS
NON CONFICENCE IN THE FEDERAL AND PROVINCIAL LEADERSHIP AND ECONOMIES