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The Bank of Canada is launching a new securities repo initiative designed to provide further support to financial market liquidity.

The central bank will introduce securities repo operations (SRO) on July 27, 2020. The bank will also suspend its existing securities lending program at the same time.

The new program will make up to 50% of the bank’s holdings of government of Canada bonds and T-bills (except real return bonds) available on an overnight basis through repurchase operations.

“The SROs will provide a temporary source of Government of Canada nominal bonds and treasury bills to primary dealers to support liquidity in the securities financing market,” it said.

Securities financing markets are intended to give large dealers greater flexibility in accessing funding and securities to trade with clients.

The bank said that the new repo program — which is consistent with best practices at other central banks and with recommendations from the Bank for International Settlements (BIS) — is intended to “support core funding markets and to foster the well-functioning of the Government of Canada securities market.”