City of Vancouver locks in $175-million bond deal as demand exceeds supply | Daily Hive

City of Vancouver locks in $175-million bond deal below expected cost, as demand exceeds supply

Vancouver City Hall. (JHVEPhoto/Shutterstock)

The City of Vancouver has secured a $175-million bond deal to help pay for capital projects, at a lower overall borrowing cost than City staff initially expected.

According to two internal memos from City staff to Vancouver City Council earlier this month, the 10-year bond was sold on Oct. 22, 2026. The transaction is scheduled to settle on Oct. 30, with repayment due in October 2036.

The deal gives the municipal government access to money upfront for eligible capital projects, while spreading the cost of paying for those investments over time.

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A municipal bond is essentially a loan from investors. They provide money to the City in exchange for regular interest payments and a promise that their original investment will be repaid.

For municipal governments, this is a way to finance major construction, repairs, and upgrades without having to cover the entire bill from a single year’s operating revenues. Capital projects generally include roads, community and recreational facilities, parks, utilities, and other infrastructure.

The bond carries a fixed annual interest rate of 4.35 per cent, with interest paid twice a year. On $175 million, that works out to approximately $7.61 million in interest annually.

The bond is structured as a sinking fund debenture. The City sets aside money over time in a dedicated fund to prepare for repaying the debt when it comes due. Vancouver’s municipal government’s annual operating budgets cover its debt-servicing costs, including annual contributions to these repayment funds.

This allows the City to move ahead with capital investments while committing part of future budgets to paying for them.

Once bank fees are included, the overall borrowing cost is 4.43 per cent.

The City attracted more investor demand than the $175 million in bonds available. That interest came despite a precarious market for borrowing. City staff pointed to persistent inflation, expectations that the Bank of Canada could keep interest rates elevated for longer, and an increase in the supply of bonds competing for investors’ money.

City staff nevertheless considered conditions favourable for a 10-year bond, citing strong investor demand and more attractive borrowing costs than were available for terms of 20 to 30 years.

Moreover, the City’s strong credit ratings from international credit rating agencies also helped its appeal to investors. The first memo earlier this month listed ratings of Aaa from Moody’s and AAA from S&P Global Ratings, both with stable outlooks for the municipal government. City staff noted that those ratings supported investor confidence in the City’s bonds.

BMO Capital Markets led the group of financial institutions handling the sale, with CIBC World Markets and National Bank Financial serving as co-leads.

Vancouver City Council approved the issuance of up to $175 million in July 2026, giving City staff the ability to determine the interest rate, pricing, and other terms.

Meanwhile, mayor-elect Pete Fry wants to create an additional municipal bond program, specifically to help finance the construction of affordable housing on City-owned land.

Under his proposal, individual and institutional investors would lend money in exchange for a modest, predictable return, with the housing remaining publicly owned and affordable. In a post-election interview with Daily Hive Urbanized last week, Fry explained how a 10-year bond could be a way to bring another source of financing into affordable housing construction, alongside support from the provincial and federal governments. However, he acknowledged that the proposal’s financial mechanics still need to be worked out.

TransLink also uses bonds to help pay for major transportation projects. Metro Vancouver’s public transit authority’s latest issuance in June 2026 consisted of $300 million in green bonds carrying an annual interest rate of 3.85 per cent, with repayment due in December 2035.

The proceeds will finance or refinance projects with environmental benefits, including cleaner transportation, low-carbon energy, energy efficiency, and other green infrastructure. This was the first issuance under TransLink’s updated green bond and sustainability frameworks, continuing a borrowing program that has included more than $2 billion in green bonds since 2018.

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