Quebec's 2025-26 Deficit Shrinks Again, Easing Funding Needs, Says National Bank

FINWIRES Analysis

A deficit running at less than half the budgeted plan strengthens Quebec's credit narrative, but National Bank flags that part of the improvement stems from delayed infrastructure spending that could reverse later. The improved net debt-to-GDP trajectory directly supports the bank's view that S&P's April downgrade was premature, setting up a potential outlook revision. Bond investors should weigh the temporary nature of some gains against genuinely firming own-source revenues.

Key Takeaways

Deficit under half the original budgeted plan

Some improvement temporary from delayed infrastructure spending

Supports case against S&P's prior downgrade

While not the final, audited tally, Quebec's preliminary report on 2025-26 delivers 'positive' news for Canada's second largest province, said National Bank of Canada.

Before deposits to the Generations Fund, Quebec's 2025-26 budget deficit is now seen at $4.9 billion or 0.8% of gross domestic product, noted the bank.

That's less than half of what was planned for back in Budget 2025 -- that original plan arriving when United States tariff anxiety was more or less at its zenith, stated National Bank.

Some of the budgetary improvement versus the latest estimate captures a slower-than-expected pacing to cost-shared/subsidized infrastructure projects, pointed out the bank. So some of the fiscal 'improvement' may prove temporary.

Still, the economy remains resilient, as evidenced by a firming in key own-source revenue streams, added National Bank. The balance sheet also looks better, with the vital net debt-to-GDP ratio ending 2025-26 on an improved trajectory.

To the bank, S&P was perhaps hasty in downgrading the province (from AA- to A+) last April, when a 'negative' outlook might have sufficed.

Morguard Announces $250 Million Debenture Offer and Early Redemption of Series H Senior Unsecured Debentures

Morguard (MRC.TO) agreed to issue $250 million aggregate principal amount of series J senior unsecured debentures, it said after markets closed on Thursday.The debentures will bear interest at a rate of 4.307% per year and will mature on June 18, 2029.Morningstar DBRS assigned a provisional rating of "BBB (low)" with a Stable trend.The company also said that it will redeem all of its outstanding 9.5% Series H senior unsecured debentures due Sept. 26, 2026 on June 22, 2026.The net proceeds of the offering will be used towards the early redemption of the 2023 debentures and for general corporate purposes, it added."The redemption price will be paid in cash and is approximately $1,014.753 per $1,000 principal amount of 2023 Debentures, together with accrued and unpaid interest on the 2023 Debentures up to, but excluding, the Redemption Date," said the company.The company's shares were last seen up $1.00 at $122.00 on the Toronto Stock Exchange.Price: $122.00, Change: $+1.00, Percent Change: +0.83%

$MRC.TO

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$JG.V