Canadian Finance Minister Jim Flaherty will probably pare the government's borrowing needs from a record high when the budget is presented today as policy makers wind down emergency stimulus and economic growth resumes.

Flaherty will outline a borrowing plan that ranges from
C$75 billion ($72.7 billion) to C$85 billion for the fiscal year starting April 1, according to three of Canada's five biggest banks. That compares with an estimated record C$100 billion for the fiscal year ending March 31, and would likely be the third highest after the C$90 billion total in fiscal 2008-2009.

"A large part of the issuance over the last couple of years was based on emergency stimulus," said Mark Chandler, head of Canadian fixed-income and currency strategy in Toronto at Royal Bank of Canada, the nation's biggest lender. "This year we should see a more comprehensive approach to debt management."

Prime Minister Stephen Harper yesterday opened a session of Parliament with a speech saying the government will end stimulus measures once a recovery takes hold. The economy will grow 2.9 percent this year, the Bank of Canada predicts, after output shrank 2.6 percent in 2009.

Chandler estimates the federal government will borrow C$75 billion in the coming fiscal year. That compares with estimates of C$85 billion from Eric Lascelles, chief economics and rates strategist in Toronto at Toronto-Dominion Bank, and $75 billion to C$80 billion from Warren Lovely, governments strategist at Canadian Imperial Bank of Commerce in Toronto.

Eoin Treacy's view The stock market recovery, particularly since last March, has been fuelled in no small part by extraordinarily loose monetary conditions. We have often referred to banks being bailed out via the yield curve and this exactly what happened on this occasion with spreads between the 10yr and 2yr reaching and often exceeding historic heights in a number of countries.

Yield curve spreads in the USA, Eurozone and the UK are at historic highs. This indicates that while there is talk about how to remove stimulus and some have made minor moves in that direction, monetary conditions remain remarkably accommodative.

Countries less affected by the credit crisis have returned to growth faster and therefore have less need of such loose monetary conditions. China, India and Australia have all begun to tighten with their respective yield curve spreads all appearing to have topped out. Arguably, Canada now also shows signs that it belongs more with this group than the former. The spread peaked near the 2001 high between July and January and has now fallen back below 200 basis points. A sustained move back above 220 basis points would be required to hinder scope for further compression.