DBRS Limited (Morningstar DBRS) downgraded the Province of British Columbia’s (BC or the Province) Issuer Rating and Long-Term Debt credit rating to AA from AA (high) and confirmed its Short-Term Debt credit rating at R-1 (high). Morningstar DBRS also downgraded British Columbia Hydro and Power Authority’s (BC Hydro) Long-Term Obligations credit rating to AA from AA (high) and confirmed its Short-Term Obligations credit rating at R-1 (high). Concurrently, Morningstar DBRS changed the trends on the Issuer Rating (BC), Long-Term Debt credit rating (BC), and Long-Term Obligations credit rating (BC Hydro) to Stable from Negative. The trends on the short-term credit ratings are Stable.
KEY CREDIT RATING CONSIDERATIONS
The downgrade reflects a deterioration in public finances relative to prior expectations. While the Province had previously indicated a potential path to balance, its 2026-27 budget (Budget 2026) now points to a sustained period of elevated deficits and a larger borrowing program, which has resulted in weaker key financial metrics. Morningstar DBRS notes that the Province has introduced modest tax measures alongside expenditure management targets and selective capital project delays, which signal some willingness to respond to fiscal pressures. While these have been insufficient to materially improve the fiscal outlook, they support a gradual approach to fiscal stabilization. The restoration of the Stable trends reflects the Province’s solid economic fundamentals and Morningstar DBRS’ expectation that the Province will be able to reduce the deficit gradually and slow down debt growth over the medium term. The credit ratings continue to be supported by BC’s prudent budgeting practices, conservative debt and liquidity management, strong market access, prudent debt structure, and diversified economic base, all of which continue to provide resilience to the Province’s credit profile.Budget 2026 forecasts a deficit of $13.3 billion in 2026-27, compared with the $9.6 billion deficit now anticipated in 2025-26. Over the medium term, the Province projects deficits of $12.2 billion and $11.4 billion for 2027-28 and 2028-29, respectively. These equate to operating deficit-to-operating revenues ratios of 13.7% for 2027-28 and 12.5% for 2028-29. Although Budget 2026 projects gradually declining deficits beyond 2026-27, they remain elevated through 2028-29, with no plan to return to balance.
The latest budget points to a deterioration in the debt trajectory beyond Morningstar DBRS’ previous expectations. The Province projects the adjusted debt-to-operating revenues ratio to increase to 162.5% in 2026-27 and will continue to rise to 197.8% by 2028-29. Given there is no plan to return to balance, Morningstar DBRS expects debt to remain high over the medium term.
US inflation continues to run high:
Thursday’s report also showed that inflation remained stubbornly higher than typical: The Personal Consumption Expenditures price index – the inflation gauge the Federal Reserve uses for its 2% target rate – climbed 0.4% from January, which held the annual rate at 2.8%.
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Excluding food and energy prices, which tend to be quite volatile, the core PCE price index also rose 0.4%, bringing the annual rate to 3% from 2.9% the month before.
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Consumers appeared to dip into the piggy banks to help prop up their spending: The savings rate fell to 4% from 4.5% the month before as inflation-adjusted (or real) after-tax incomes dropped 0.5% for the month.
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Gross domestic product, the broadest measure of economic output, grew at an annualized rate of 0.5% in the October-through-December period, down from the second estimate’s 0.7% and much lower than the 1.4% initially reported. The latest estimate factored in new data showing weaker business investment in the fourth quarter, a period when the US government was shut down for a record 43 days.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
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| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0932 % | 2,491.2 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0932 % | 4,723.8 |
| Floater | 5.81 % | 5.95 % | 25,137 | 14.00 | 4 | -0.0932 % | 2,722.3 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0316 % | 3,657.5 |
| SplitShare | 4.77 % | 4.53 % | 70,019 | 2.91 | 5 | 0.0316 % | 4,367.8 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0316 % | 3,408.0 |
| Perpetual-Premium | 5.90 % | 1.78 % | 54,045 | 0.08 | 1 | -1.0685 % | 3,001.7 |
| Perpetual-Discount | 5.75 % | 5.78 % | 48,881 | 14.22 | 34 | -0.0627 % | 3,299.5 |
| FixedReset Disc | 5.87 % | 6.01 % | 108,653 | 13.70 | 27 | -0.3528 % | 3,208.5 |
| Insurance Straight | 5.64 % | 5.73 % | 61,869 | 14.29 | 22 | -0.1344 % | 3,225.3 |
| FloatingReset | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.3528 % | 3,816.9 |
| FixedReset Prem | 6.02 % | 4.59 % | 86,918 | 2.27 | 21 | -0.2410 % | 2,637.6 |
| FixedReset Bank Non | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.3528 % | 3,279.7 |
| FixedReset Ins Non | 5.21 % | 5.48 % | 77,391 | 14.22 | 14 | -0.0666 % | 3,170.2 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BN.PF.E | FixedReset Disc | -10.64 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-04-09 Maturity Price : 21.00 Evaluated at bid price : 21.00 Bid-YTW : 6.65 % |
| IFC.PR.E | Insurance Straight | -4.52 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-04-09 Maturity Price : 21.96 Evaluated at bid price : 22.20 Bid-YTW : 5.89 % |
| GWO.PR.Y | Insurance Straight | -4.33 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-04-09 Maturity Price : 19.00 Evaluated at bid price : 19.00 Bid-YTW : 5.97 % |
| MFC.PR.L | FixedReset Ins Non | -3.81 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-04-09 Maturity Price : 22.95 Evaluated at bid price : 24.00 Bid-YTW : 5.60 % |
| BIP.PR.F | FixedReset Prem | -2.19 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-04-09 Maturity Price : 23.42 Evaluated at bid price : 24.99 Bid-YTW : 6.09 % |
| BN.PF.C | Perpetual-Discount | -1.86 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-04-09 Maturity Price : 20.02 Evaluated at bid price : 20.02 Bid-YTW : 6.11 % |
| GWO.PR.G | Insurance Straight | -1.27 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-04-09 Maturity Price : 22.24 Evaluated at bid price : 22.51 Bid-YTW : 5.81 % |
| IFC.PR.G | FixedReset Ins Non | -1.06 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-04-09 Maturity Price : 23.57 Evaluated at bid price : 25.10 Bid-YTW : 5.66 % |
| SLF.PR.H | FixedReset Ins Non | 1.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-04-09 Maturity Price : 22.46 Evaluated at bid price : 23.38 Bid-YTW : 5.56 % |
| GWO.PR.R | Insurance Straight | 1.54 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-04-09 Maturity Price : 21.13 Evaluated at bid price : 21.13 Bid-YTW : 5.73 % |
| MFC.PR.F | FixedReset Ins Non | 1.68 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-04-09 Maturity Price : 20.54 Evaluated at bid price : 20.54 Bid-YTW : 5.52 % |
| BN.PR.T | FixedReset Disc | 1.83 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-04-09 Maturity Price : 21.75 Evaluated at bid price : 22.20 Bid-YTW : 6.01 % |
| BN.PR.N | Perpetual-Discount | 2.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-04-09 Maturity Price : 20.10 Evaluated at bid price : 20.10 Bid-YTW : 5.96 % |
| GWO.PR.T | Insurance Straight | 2.33 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-04-09 Maturity Price : 22.15 Evaluated at bid price : 22.43 Bid-YTW : 5.77 % |
| CU.PR.F | Perpetual-Discount | 2.56 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-04-09 Maturity Price : 20.80 Evaluated at bid price : 20.80 Bid-YTW : 5.48 % |
| CU.PR.H | Perpetual-Discount | 4.91 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-04-09 Maturity Price : 23.20 Evaluated at bid price : 23.50 Bid-YTW : 5.65 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BN.PR.R | FixedReset Disc | 173,675 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-04-09 Maturity Price : 22.18 Evaluated at bid price : 22.85 Bid-YTW : 5.89 % |
| GWO.PR.P | Insurance Straight | 78,500 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-04-09 Maturity Price : 23.34 Evaluated at bid price : 23.63 Bid-YTW : 5.75 % |
| ENB.PF.C | FixedReset Disc | 61,170 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-04-09 Maturity Price : 22.21 Evaluated at bid price : 22.77 Bid-YTW : 6.30 % |
| ENB.PF.E | FixedReset Disc | 49,130 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-04-09 Maturity Price : 22.15 Evaluated at bid price : 22.70 Bid-YTW : 6.31 % |
| SLF.PR.D | Insurance Straight | 32,600 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-04-09 Maturity Price : 20.73 Evaluated at bid price : 20.73 Bid-YTW : 5.41 % |
| GWO.PR.H | Insurance Straight | 27,500 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-04-09 Maturity Price : 21.25 Evaluated at bid price : 21.25 Bid-YTW : 5.76 % |
| There were 3 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| See TMX DataLinx: ‘Last’ != ‘Close’ and the posts linked therein for an idea of why these quotes are so horrible. | ||
| Issue | Index | Quote Data and Yield Notes |
| BN.PF.E | FixedReset Disc | Quote: 21.00 – 23.95 Spot Rate : 2.9500 Average : 1.6508 YTW SCENARIO |
| GWO.PR.Y | Insurance Straight | Quote: 19.00 – 20.40 Spot Rate : 1.4000 Average : 0.8749 YTW SCENARIO |
| MFC.PR.L | FixedReset Ins Non | Quote: 24.00 – 25.00 Spot Rate : 1.0000 Average : 0.5924 YTW SCENARIO |
| BIP.PR.F | FixedReset Prem | Quote: 24.99 – 25.85 Spot Rate : 0.8600 Average : 0.5412 YTW SCENARIO |
| IFC.PR.E | Insurance Straight | Quote: 22.20 – 23.40 Spot Rate : 1.2000 Average : 0.8997 YTW SCENARIO |
| BN.PR.Z | FixedReset Prem | Quote: 24.00 – 25.60 Spot Rate : 1.6000 Average : 1.3660 YTW SCENARIO |