Expansion of Assets the Bank of Canada will Acquire for Balance Sheet Management Purposes
As part of the regular management of its balance sheet, the Bank of Canada acquires securities to offset its liabilities, which consist mainly of bank notes in circulation and Government of Canada deposits. The Bank acquires Government of Canada nominal bonds and treasury bills outright through non-competitive bids at government securities auctions, and high quality assets through repurchase agreements (term repos).
The Bank is now expanding the assets it acquires outright to include the purchase of Canadian dollar federal government guaranteed debt securities issued by federal Crown corporations. This expansion is for balance-sheet management purposes only and has no implications for monetary policy and financial stability objectives of the Bank. The expansion of assets the Bank can acquire for its balance sheet is done to provide the Bank with more flexibility in the range of high quality assets it can acquire to offset the continued growth in bank notes. It also allows the Bank more flexibility, should it be necessary, to further reduce its participation at primary auctions of Government of Canada bonds to help increase the tradeable float of those benchmark securities and hence support their secondary market liquidity.
As part of these changes the Bank plans to allocate a small portion of its balance sheet for acquiring federal government guaranteed securities by purchasing Canada Mortgage Bonds. These purchases will be conducted in the primary market, on a non-competitive basis, and are expected to commence in the latter part of 2018 or in the first half of 2019. The Bank will continue to adhere to its principles of neutrality, prudence and transparency and conduct its transactions in a manner that limits market distortions and minimizes impact on market prices.
The Bank’s Statement of Policy Governing the Acquisition and Management of Financial Assets for the Bank of Canada’s Balance Sheet describes objectives of holding financial assets on the balance sheet and operational guidelines governing purchases of such assets.
For further information, please contact:
Financial Markets Department
Bank of Canada