Bank of Canada reducing pace of short-term purchases to pre-pandemic levels

Citing improving market conditions, the Bank of Canada is scaling back some of its efforts at shoring up short-term liquidity introduced in response to the market turmoil caused by Covid-19.

In a statement, the Bank said “[c]onditions in short-term funding markets have improved” and that its efforts at ensuring short-term liquidity are working as planned.

In particular, strains in both the government Treasury Bill market and the short-term provincial borrowing market “have diminished significantly,” it said.

As a result, the bank is reducing its acquisition of these securities.

Specifically, it will reduce the amount it purchases in T-Bill auctions from 40% to 20% of tendered amounts, “which is in line with average levels prior to the onset of the Covid-19 pandemic.”

It will also cut its share of each accepted offering of directly issued provincial money market securities from 40% to 20% of the offering.

The bank said that it may adjust these percentages if market conditions warrant.

“The Bank of Canada continues to closely monitor global and domestic market developments and remains committed to providing liquidity as required to support the functioning of the Canadian financial system,” it said.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.