On-the-run Premia, Settlement Fails, and Central Bank Access Staff Working Paper 2025-19 Fabienne Schneider The premium on “on-the-run” Treasuries is an anomaly. I explain it using a model in which primary dealers hold inventories of Treasuries. I use the model to analyze the effects of granting access to central bank facilities. Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Financial markets, Market structure and pricing, Monetary policy JEL Code(s): G, G1, G12, G19, G2, G23
The Dynamic Canadian Debt Strategy Model Technical Report No. 127 Nicolas Audet, Joe Ning, Adam Epp, Jeffrey Gao We present a dynamic debt strategy model framework designed to assist sovereign debt portfolio managers in choosing an optimal debt issuance strategy. The main innovation of this framework is the introduction of dynamic issuance strategies, which allow issuance decisions to vary over time based on the model’s simulated state variables. Content Type(s): Staff research, Technical reports Research Topic(s): Debt management, Econometric and statistical methods, Financial markets, Fiscal policy JEL Code(s): C, C6, C61, G, G1, G11, G17, H, H6, H63, H68
The impact of trading flows on Government of Canada bond prices Staff Analytical Note 2025-20 Andreas Uthemann, Rishi Vala, Jun Yang Trading flows affect Government of Canada bond prices. Our estimates suggest a sale of 1% of the available supply of bonds typically lowers bond prices by 0.2%. From 2000 to 2025, demand from institutional investors, such as Canadian pension funds and foreign investors, explains 69% of quarterly price variation, with the remainder explained by changes in the supply of bonds. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Asset pricing, Debt management, Econometric and statistical methods, Financial institutions, Financial markets, Financial stability, Market structure and pricing, Sectoral balance sheet JEL Code(s): C, C0, C01, C3, C36, C5, C58, D, D5, D53, E, E6, E62, G, G1, G11, G12, G2, G23
Are Hedge Funds a Hedge for Increasing Government Debt Issuance? Staff Discussion Paper 2025-7 Adam Epp, Jeffrey Gao This paper studies the rapid increase since 2019 of Government of Canada (GoC) debt issuance alongside greater hedge fund participation at GoC bond auctions. We find a systematic relationship between GoC debt stock and hedge fund bidding shares at auction. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Debt management, Financial institutions, Financial markets, Financial stability JEL Code(s): D, D4, D44, G, G1, G12, G2, G23, H, H6, H63
Risk-Free Uncollateralized Lending in Decentralized Markets: An Introduction to Flash Loans Staff Discussion Paper 2025-6 Jack Mandin A flash loan is a special type of uncollateralized loan with zero default risk. I document the use for flash loans across major blockchains that are Ethereum-Virtual-Machine-compatible. Flash loans expand access to liquidity, and highly sophisticated actors use them for many practical applications. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Digital currencies and fintech, Financial markets JEL Code(s): G, G0, G1, G2
March 17, 2025 Will asset managers dash for cash? A summary of the implications for central banks David Cimon, Jean-Philippe Dion, Jean-Sébastien Fontaine, Jabir Sandhu We consider ways central banks could adapt in the event of an increased risk of a dash for cash from asset managers. We explore ideas such as new facilities that ease asset managers’ ability to convert existing assets to cash or new assets with liquidity that central banks would guarantee. Content Type(s): Publications, Financial System Hub articles Research Topic(s): Central bank research, Coronavirus disease (COVID-19), Financial institutions, Financial markets, Financial stability, Financial system regulation and policies JEL Code(s): E, E5, E58, G, G0, G00, G01, G1, G2
Will Asset Managers Dash for Cash? Implications for Central Banks Staff Discussion Paper 2025-5 David Cimon, Jean-Philippe Dion, Jean-Sébastien Fontaine, Jabir Sandhu We consider ways central banks could adapt in the event of an increased risk of a dash for cash from asset managers. We explore ideas such as new facilities that ease asset managers’ ability to convert existing assets to cash or new assets with liquidity that central banks would guarantee. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Central bank research, Coronavirus disease (COVID-19), Financial institutions, Financial markets, Financial stability, Financial system regulation and policies JEL Code(s): E, E5, E58, G, G0, G00, G01, G1, G2
Stress testing central counterparties for resolution planning Staff Analytical Note 2025-11 Katherine Brennan, Bo Young Chang, Alper Odabasioglu, Radoslav Raykov The Bank of Canada completed its first resolution plan for the Canadian Derivatives and Clearing Corporation (CDCC) in 2024. To estimate the resolution costs, we apply the extreme value theory method to simulate the credit losses that would result from extreme scenarios where multiple clearing members default at the same time. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Financial institutions, Financial markets, Financial stability, Financial system regulation and policies, Payment clearing and settlement systems JEL Code(s): G, G1, G17, G2, G23, G28
Is anyone surprised? The high-frequency impact of US and domestic macroeconomic data announcements on Canadian asset prices Staff Analytical Note 2025-10 Blake DeBruin Martos, Rodrigo Sekkel, Henry Stern, Xu Zhang Using almost two decades of detailed high-frequency data, we show how Canadian interest rates, the CAD/USD spot exchange rate, and stock market returns react to both US and domestic macro announcements. We find that Canadian macroeconomic announcements invoke greater responses in short-term yields, whereas US macroeconomic announcements play an increasingly important role in the yield movements of longer-term assets. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Asset pricing, Exchange rates, Financial markets JEL Code(s): G, G1, G14, G15
Estimating the inflation risk premium Staff Analytical Note 2025-9 Bruno Feunou, Gitanjali Kumar Is there a risk of de-anchoring of inflation expectations in the near term? We estimate the inflation risk premium using traditional asset pricing models to answer this question. The risk of de-anchoring is elevated compared with the period before the COVID-19 pandemic and is higher in the United States than in Canada. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Asset pricing, Econometric and statistical methods JEL Code(s): C, C2, C22, C5, C58, G, G1, G12