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(Corrects currency of bond in second paragraph.)
Ontario’s borrowing costs climbed after premier Dalton McGuinty’s resignation cast doubt on plans by Canada’s largest province to balance its books by 2017.
Ontario’s $1.25 billion of 1.65 percent notes due September 2019 rose five basis points to 1.65 percent today, according to Bloomberg composite prices, after McGuinty stepped down yesterday after 16 years as leader of the Liberal party, suspending legislature effective today. The price fell to face value from a closing price of $100.31 yesterday.
“McGuinty resigning is a sign more than anything that he’s given up and he thinks the Ontario fiscal situation is so bad that he can’t turn it around,” Aaron Fennell, a futures specialist at the Bank of Nova Scotia (BNS)’s ScotiaMcLeod unit in Toronto, said in a phone interview. “It’s him acknowledging that the deficit problem has gotten out of control.”
McGuinty’s resignation comes amid pressure from opposition parties over the cancellation of two power plant projects west of Toronto. Opposition groups say the plants will cost about three times more than estimated. Before last year’s election campaign, the government called off the construction of the power stations after local residents opposed the sites.
Energy Minister Chris Bentley is facing a censure motion from the opposition after they accused him of hiding documents that show the cancellation caused the projects’ cost to soar.
Moody’s Investors Service is keeping its medium-term outlook for Ontario, analyst Jennifer Wong said in a phone interview. The firm cut the province’s rating to Aa2, its third- highest, from Aa1 in April and revised the outlook to stable from negative. The downgrade brought Moody’s assessment closer to Standard & Poor’s, which rates Ontario AA-, its fourth-lowest level.
“We’ll have to see what changes there may or may not be in terms of their fiscal plan to assess what impact his resignation has on the province’s fiscal situation,” Wong said.
Ontario revised its deficit projection yesterday for the current fiscal year to C$14.4 billion, or C$400 million lower than estimated in the 2012 budget, a government report said.
With assistance from Cecile Gutscher in Toronto.
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