G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

• Borrowing Costs for Government of Canada Treasury Bills

  Staff Analytical Note 2019-28 Jessica Lee, Jabir Sandhu, Adrian Walton

  The cost of borrowing Government of Canada treasury bills (t-bills) in the repurchase (repo) market is mainly explained by the relationship between the parties involved. Some pairs of parties conduct most of their repos for t-bills rather than bonds, and at relatively high borrowing costs. We speculate that these pairs have formed a mutually beneficial service relationship in which one party consistently receives t-bills, while the other receives cash at a relatively cheap rate.

  Content Type(s): Staff Research, Staff Analytical Notes Topic(s): Financial markets JEL Code(s): G, G1, G10, G11, G12, G2, G20, G21, G23, G3, G32

• Relative Value of Government of Canada Bonds

  Staff Analytical Note 2019-23 Jean-Sébastien Fontaine, Jabir Sandhu, Adrian Walton

  Government of Canada bonds in circulation that promise very similar payoffs can have different prices. We study the reason for these differences. Bonds that trade more often and earn high rental income in the repurchase agreement (repo) market tend to have higher prices. Bonds with longer tenors and times to maturity tend to have lower prices. This contrast between cheap and expensive bonds is important because trading volume and rental income can change rapidly, unlike tenor and time to maturity, which are stable.

  Content Type(s): Staff Research, Staff Analytical Notes Topic(s): Financial markets JEL Code(s): G, G1, G10, G11, G12, G2, G23, G3, G32

• Measuring Non-Financial Corporate Sector Vulnerabilities in Canada

  Staff Analytical Note 2019-15 Timothy Grieder, Claire Schaffter

  The ratio of non-financial corporate debt to gross domestic product in Canada has increased noticeably in recent years and is currently at an all-time high. In light of this development, we use a unique firm-level dataset to construct vulnerability indicators for the non-financial corporate sector in Canada.

  Content Type(s): Staff Research, Staff Analytical Notes Topic(s): Business fluctuations and cycles, Credit and credit aggregates, Financial stability, Monetary and financial indicators, Recent economic and financial developments, Sectoral balance sheet JEL Code(s): G, G0, G01, G3, G32

• Entrepreneurial Incentives and the Role of Initial Coin Offerings

  Staff Working Paper 2019-18 Rod Garratt, Maarten van Oordt

  Initial coin offerings (ICOs) are a new mode of financing start-ups that saw an explosion in popularity in 2017 but declined in popularity in the second half of 2018 as regulatory pressure, instances of fraud and reports of poor performance began to undermine their reputation.

  Content Type(s): Staff Research, Staff Working Papers Topic(s): Asset Pricing, Exchange rates JEL Code(s): G, G3, G32

• Financial Distress and Hedging: Evidence from Canadian Oil Firms

  Staff Discussion Paper 2019-4 Kun Mo, Farrukh Suvankulov, Sophie Griffiths

  The paper explores the link between financial distress and the commodity price hedging behaviour of Canadian oil firms.

  Content Type(s): Staff Research, Staff Discussion Papers Topic(s): Financial markets, Firm dynamics JEL Code(s): G, G3, G32, Q, Q4, Q40

• The Role of Corporate Saving over the Business Cycle: Shock Absorber or Amplifier?

  Staff Working Paper 2018-59 Xiaodan Gao, Shaofeng Xu

  We document countercyclical corporate saving behavior with the degree of countercyclicality varying nonmonotonically with firm size. We then develop a dynamic stochastic general equilibrium model with heterogeneous firms to explain the pattern and study its implications for business cycles.

  Content Type(s): Staff Research, Staff Working Papers Topic(s): Business fluctuations and cycles, Economic models JEL Code(s): E, E2, E20, E22, E3, E32, G, G3, G31, G32

• The Impact of Government Debt Supply on Bond Market Liquidity: An Empirical Analysis of the Canadian Market

  Staff Working Paper 2018-35 Jeffrey Gao, Jianjian Jin, Jacob Thompson

  This paper finds that Government of Canada benchmark bonds tend to be more illiquid over the subsequent month when there is a large increase in government debt supply. The result is both statistically and economically significant, stronger for the long-term than the short-term sector, and is robust when other macro factors are controlled for.

  Content Type(s): Staff Research, Staff Working Papers Topic(s): Asset Pricing, Debt Management, Financial markets JEL Code(s): D, D5, D53, G, G1, G12, G18, G2, G3, G32
• June 7, 2018

  The Bank of Canada’s Financial System Survey

  Financial System Review - June 2018 Guillaume Bédard-Pagé, Ian Christensen, Scott Kinnear, Maxime Leboeuf

  This report presents the details of a new semi-annual survey that will improve the Bank of Canada’s surveillance across the financial system and deepen efforts to engage with financial system participants. The survey collects expert opinions on the risks to and resilience of the Canadian financial system as well as on emerging trends and financial innovations. The report presents an overview of the survey and provides high-level results from the spring 2018 survey.

  Content Type(s): Publications, Financial System Review Article Topic(s): Financial Institutions, Financial markets, Financial services, Financial stability, Financial system regulation and policies, Recent economic and financial developments JEL Code(s): C, C8, C83, G, G1, G11, G18, G2, G28, G3, G32

• Measuring Vulnerabilities in the Non-Financial Corporate Sector Using Industry- and Firm-Level Data

  Staff Analytical Note 2018-17 Timothy Grieder, Michal Lipsitz

  Aggregate non-financial corporate debt-to-GDP has been growing rapidly in recent years and is at an all-time high. This growth began in 2011 and accelerated as the oil price shock affected the Canadian economy.

  Content Type(s): Staff Research, Staff Analytical Notes Topic(s): Business fluctuations and cycles, Credit and credit aggregates, Financial stability, Monetary and financial indicators, Recent economic and financial developments, Sectoral balance sheet JEL Code(s): G, G0, G01, G3, G32

• Credit Risk Transfer and Bank Insolvency Risk

  Staff Working Paper 2017-59 Maarten van Oordt

  The present paper shows that, everything else equal, some transactions to transfer portfolio credit risk to third-party investors increase the insolvency risk of banks. This is particularly likely if a bank sells the senior tranche and retains a sufficiently large first-loss position.

  Content Type(s): Staff Research, Staff Working Papers Topic(s): Credit risk management, Financial Institutions, Financial stability JEL Code(s): G, G2, G21, G28, G3, G32