CANADA PROJECTS A 2027/28 BUDGET DEFICIT OF C$62.5 BLN, COMPARED WITH C$63.1 BLN FORECAST IN APRIL, WITH THE FEDERAL DEBT-TO-GDP RATIO EXPECTED AT 39.9% IN 2026/27, PEAKING AT 40.4% IN 2028/29 BEFORE EASING TO 40.1% BY 2030/31

Canada's federal government projects a 2027/28 budget deficit of C$62.5 billion, slightly narrower than the C$63.1 billion forecast in April, while the debt-to-GDP ratio is expected to reach 39.9% in 2026/27 and peak at 40.4% in 2028/29 before easing. The revision is marginal, so the fiscal path itself is largely unchanged, and the transmission to markets runs mainly through government bond supply and sovereign risk premia rather than an abrupt policy shift. A stable-to-slightly-lower deficit trajectory reduces the pace of expected net Canadian government issuance, which can modestly support Government of Canada bond prices at the margin, while the peaking debt ratio keeps long-end term premia sensitive to any upward revision. The Canadian dollar and domestic rate expectations are the most directly exposed, since fiscal trajectory feeds into the sovereign credit narrative and the relative attractiveness of Canadian debt versus U.S. Treasuries. Traders should watch the upcoming Bank of Canada rate decision and the next Canadian federal fiscal update for any change to GDP grow

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