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This note examines whether central clearing of repos benefits non-dealer participants in Canadian fixed-income markets. While prior research highlights lower funding and balance-sheet costs for dealers, less is known about client effects. Understanding these broader implications is important for assessing central clearing’s contribution to market efficiency and resilience.

Sovereign borrowing is rising, just as central banks are stepping back. Meanwhile, commercial bank holdings of sovereign bonds remain well below pre-global financial crisis levels. This leaves foreign investors and investment funds, often hedge funds, to absorb more of this growing supply. Their greater involvement supports liquidity and robust auction results, but it can also concentrate risk.

This paper documents Canada’s recent review of its sovereign debt distribution framework (DDF). Informed by a context of record-high debt issuance since the previous DDF review, along with comparisons with sovereign peers and insights from market participants, the review identified an important need to broaden Canada’s dealer base internationally to support a larger and more diverse set of investors.

This analytical paper examines the organization of Government of Canada bond dealing. We focus on dealers’ hedging and funding practices, the market infrastructures that support those practices, and trading costs across the yield curve. This paper builds on earlier work discussing Canada’s fixed-income market: "Government of Canada Fixed-Income Market Ecology."

This paper examines the interaction between quantitative easing (QE) and the securities lending facility (SLF) using a detailed dataset on Riksbank QE purchases, Swedish DMO SLF transactions and OTC repo deals. A theoretical model further shows how excess demand for assets and search frictions shift the SLF from a backstop to a first-resort tool.

Project Samara was a real‑world experiment testing distributed ledger technology and wholesale central bank digital money for bond issuance and settlement in Canada. It demonstrated technical feasibility and potential efficiency and risk‑reduction benefits, while highlighting important trade‑offs related to complexity, governance, and regulatory alignment.

Hedge funds are active in Canadian government bond markets and help improve market efficiency. But their trading strategies are not well understood. We offer insights into the range of strategies hedge funds use beyond the more commonly known cash-futures basis trade. We also explore the concentration of trading activity among a few large funds.

In 2024, the Canadian Overnight Repo Rate Average (CORRA) rose 7 basis points above the Bank of Canada’s target overnight rate as settlement balances declined and hedge fund borrowing increased by $30 billion, straining dealers’ balance sheets. Exercising market power, dealers raised rates, and as client activity grew, these higher rates increasingly influenced CORRAs deviation from target.

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.

We propose a novel approach to estimating consumer demand for differentiated products. We eliminate the need for instrumental variables by assuming demand shocks are sparse. Our empirical applications reveal strong evidence of sparsity in real-world datasets.