Best borrowers or just euro backers?

Congratulations, we’re all winners! Canada has been recognized by EuroWeek as carrying out the bond deal of the year in 2010. Who knew we were in the running? Who knew countries could win accolades for their borrowing finesse?

But it’s not our overall bond-issuing prowess that has impressed the judges but specifically the placement of a €2-billion issue in Europe. Not a bad trick, considering European patience with sovereign debt issuers was probably quite frayed at the time.

“This award is a vote of confidence by the global financial industry in the fiscal management of the Harper Government,” said the Honourable Jim Flaherty, Minister of Finance, ignoring the influence of close bank regulation and a decade of belt-tightening that predates his government.

“Combined with our Triple-A debt rating and the best fiscal position in the Group of Seven industrialized countries, the Canada brand is well established in financial markets,” Flaherty said.

He went on to tout the government’s $60-billion stimulus package as having limited Canadian exposure to the worst economic downturn since the Great Depression.

So, what did we do with the roughly US$2.8 billion we borrowed from Europe? Not much.

“The proceeds were used exclusively to supplement and diversify funding for Canada’s foreign exchange reserves rather than to finance public debt or spending,” the government said in a press release.

That’s right, we’re just sitting on it.

Who bought the debt? Mostly “central banks, other official institutions, commercial banks and foreign-based investment funds across a diverse geographical area,” all of which presumably had a stake in shoring up the euro by asking us to hold on to a couple of billion of them.

The deal was placed in January 2010, when the euro was worth about $1.49. It’s now worth $1.36, according to the Bank of Canada. Over the ensuing 14 months, we’re down $259.8 million—not counting the 3.5% coupon on the 10-year bonds.

But at least we won a prize. No, it doesn’t have a cash value.