The Bank of Canada announced today that it has sent the following letter to the Investment Dealers Association of Canada.

On Friday, 2 June 2006, the Investment Dealers Association of Canada (IDA), at the request of the Bank of Canada (Bank), required Member Firms designated as Primary Dealers of Government of Canada securities to complete a series of Net Position Reports for holdings in the Government of Canada 10-year bond issue, 4.5% June 1 2015, as of the close of business, for the following days: May 10, 25, 26, and 29, 2006.

This action by the IDA and the Bank was prompted by conditions in the repo market for the 10-year Government of Canada benchmark issue. As part of the surveillance of the Domestic Debt markets, an IDA Member Firm and its related companies are required to file a Net Position Report when requested by the IDA. A Net Position Report provides information on inventory positions and trading patterns in the dealer community. This requirement is established in IDA Policy No. 5 and is also a condition of the "Terms of Participation in Auctions for Government Securities Distributors."

A review of the Net Position Reports and information derived from financial markets indicate that there are insufficient grounds to warrant the Bank requesting the IDA to conduct an investigation under IDA Policy No. 5. The Bank and the Department of Finance will be meeting with representatives of the Investment Industry Association of Canada (IIAC) and the IDA to review this episode in view of recent changes to IDA Policy No. 5, structural developments in the market, and the requirements of the "Terms of Participation in Auctions for Government Securities Distributors."