The Department of Finance and the Bank of Canada have issued a consultation document on issues relating to the design and structure of the government’s domestic bond program for the fiscal year 2006/07 and beyond.

The paper identifies a variety of possible changes that are being contemplated for the government’s bond program in the short and medium terms. Comments are invited by November 30.

In the 2005/06 Debt Management Strategy, the government announced that it would be assessing potential structural changes to the bond program in light of declining fixed-rate borrowing needs. This consultation paper identifies a broad spectrum of options, ranging from modest to more fundamental changes.

Market participants are requested to provide their views on the government’s general principles regarding liquidity and the regularity of issuance. Their views are then sought on specific potential measures, which are presented in two broad categories: potential near-term changes, which largely preserve the current structure of the bond program; and, more fundamental changes, which would alter the design of the bond program over the medium term. Finally, views are sought on operational measures to improve treasury management.

The more fundamental changes up for consideration include: reducing current benchmark issuance targets; reducing the frequency of auctions to maintain larger auction sizes; and, eliminating one of the four key maturities (2, 5, 10, and 30 year bonds).