Debt Management Operational Enhancements

A key federal debt strategy objective is maintaining a well-functioning market in Government of Canada securities. In keeping with the government's commitment to market consultations in domestic debt management issues, in August 2001 consultations were held with market participants on potential operational enhancements. In particular, the Government sought comments from Government Securities Distributors and investors on potential initiatives geared towards enhancing liquidity of the Government of Canada securities market and broadening participation in debt operations. The related consultation document previously posted and a summary of the comments received posted today are available on our web site.

Based on feedback received from the consultation process, the following operational adjustments will be made. The changes are in keeping with the current debt strategy plan, as announced in February 2001, and do not involve any restructuring of bond or treasury bill programs.

• To reduce market risk for participants and encourage broader participation, the submission deadline for regular Government of Canada bond buyback operations will be changed from 2 p.m. to 1:15 p.m., starting 10 October 2001. The change will reduce the time gap between the release of auction results (now at 12:45 p.m.) and the buyback operation from 1:15 hours to 30 minutes.
• To stimulate participation of existing securities holders in buyback operations, the government will implement buyback operations using the switch method on a trial basis. These operations will be conducted in addition to regular buybacks that occur on auction days and will offer market participants the opportunity to convert their holdings of less-liquid government bonds into a corresponding benchmark bond. Operational details will be announced at a later date. The first pilot operation is planned to be conducted early in the fourth quarter of this fiscal year.
• To enhance the effectiveness of the current Cash Management Bond Buyback pilot program, the threshold which the government will not reduce the outstanding amount of bonds maturing on any given target date is being reduced from $6 to $4 billion. This change is effective immediately.