Terms and Conditions

Operation details

Auction date, amount, minimum bid rate, settlement date, maturity date, and other information will be announced by the Bank of Canada ahead of each auction.

Type of auction

Multiple rate competitive auction for a fixed Canadian dollar (Can$) cash-value amount.

Term

Transactions will typically be for terms of approximately 1 or 3 months, with exact dates to be confirmed ahead of each operation.

At the Bank of Canada’s discretion, transactions may also be for shorter or longer terms.

Eligible counterparties

Canadian Primary Dealers in Government of Canada securities. The Bank of Canada has sole discretion to remove a Primary Dealer from the list of approved eligible counterparties for term repo transactions, cap or limit a counterparty’s awards in a particular auction or otherwise cease to enter into term repo transactions with such counterparty for any reason.

Tender process

Term repo transactions will normally be conducted at 9:45 a.m. (Ottawa time) with a deadline of 10:00 a.m. (Ottawa time) for participants to submit tenders. The Bank of Canada reserves the right to conduct these transactions earlier or later in the day, with an approximate 15-minute tender submission deadline to be set by the Bank of Canada.

Tenders must specify a bid rate and an amount on a cash-value basis. A maximum of two tenders can be submitted by each participant for each term on offer.

The minimum bid rate is based on the overnight index swap rate for equivalent maturities of the term repo transaction as determined by the Bank of Canada. The Bank of Canada will announce the minimum bid rate 30 minutes before the auction deadline.

Each bid rate must be submitted on a yield basis, up to two decimal places.

Tender amounts are subject to maximum allocation limits. The minimum tender amount is $10 million, with minimum increments of $1 million.

Verbal tenders must be confirmed in writing by sending an email to operations@bank-banque-canada.ca.

The Bank of Canada reserves the right to accept or reject any or all bids, in whole or in part, including, without limitation, the right to accept less than the total amount specified ahead of the auction.

Allocation mechanism

Tenders with the highest bid rate will be accepted and allocated first. Tenders with successively lower bid rates will continue to be accepted until the auction is completely allocated. The lowest accepted bid rate is the cut-off rate. If the sum of the tender amounts at the cut-off rate exceeds the amount available to allocate, these tenders will be allocated on a pro-rated basis and rounded to the nearest $1 million.

Maximum allocation

For each operation, winning participants will be awarded up to a maximum of 50 per cent of the total amount offered.

Eligible counterparties will also be subject to a limit of either 25 per cent or 15 per cent on the total amount of term repos outstanding, which will be communicated to eligible counterparties directly. The limit on the total amount outstanding is based on each institution’s annual average market share in the primary, secondary and repo markets for Government of Canada bonds and treasury bills, as determined by the Bank of Canada, and will be reviewed at least annually.

Timing of results

Winning counterparties will be notified by telephone following the allotment of the auction. The Bank of Canada will email or fax a confirmation to each winning participant, setting out the specific terms of the transaction, including the securities.

Results will be published on the Bank of Canada’s website as soon as possible following the auction. These transactions will also be reflected on the Bank of Canada’s balance sheet.

Eligible securities

Only Canadian dollar-denominated marketable securities that are directly-issued or explicitly guaranteed by the Government of Canada or by a Canadian provincial government and that are also eligible for the Standing Liquidity Facility are eligible for these transactions. The securities must not mature on or prior to the date of maturity of the term repo operation.

National Housing Act Mortgage-Backed Securities are not eligible at this time. Eligibility of these securities will be confirmed at a later date.

Notification of securities to be used

Counterparties must notify the Bank of Canada, in the form instructed, of the securities that will be used within 60 minutes of allocating the auction.

Margins

Eligible securities are subject to the same margin requirements as those applicable in the Standing Liquidity Facility (See Margin Requirements).

Margin calls

Transactions will be subject to margin calls if the value of the posted eligible securities falls below a threshold acceptable to the Bank of Canada.

Interest calculation

Interest on the funds will be calculated on an actual/365-day basis.

Coupon and principal payments

All coupon payments received by the Bank of Canada on the securities during the term of the transaction will be kept by the Bank of Canada. The final settlement amount will be adjusted, as required, to account for these receipts in accordance with the Bank of Canada's Master Repurchase Agreement.

Counterparty settlement instructions

Securities shall be delivered to the Bank of Canada by 4:00 p.m. (Ottawa time) through CDSX on the settlement day of the auction, on a delivery of securities versus payment of funds basis. Securities to be delivered shall be confirmed with and priced by the Bank of Canada after the auction and prior to delivery.

The Bank of Canada’s CDS settlement customer unit identifier (CUID) is BOCB.

Substitution

Participants will have the right to choose one (1) day each week to substitute a maximum of four (4) securities underlying all term repo transactions. Participants must give the Bank notice of the substitution by noon two business days prior to the substitution date and in accordance with the Bank's Master Repurchase Agreement.

Legal arrangements

Eligible counterparties must have made the appropriate legal arrangements with the Bank of Canada.

The Bank of Canada reserves the right to change the terms of subsequent term repo transactions by posting a revised version of these terms and conditions.

Each tender shall be unconditional and shall be received by the Bank of Canada, not later than the time, and on the auction day, announced ahead of the auction.

The Bank of Canada may, in addition to and without prejudice to any rights under the Bank of Canada’s Master Repurchase Agreement, sanction a Primary Dealer if the Bank of Canada is of the view that the Dealer breached any of the terms, including, failing to return cash or securities on the maturity date. The sanctions that the Bank of Canada may impose include, without limitation, suspending the Primary Dealer from participating in one or more future auctions and changing, on a temporary basis, the bidding limit applicable to the Dealer.