Bank of Canada Announces Term PRA Transactions
Since 19 September 2008, the Bank of Canada has extended $8 billion in three operations to provide liquidity to Canadian term lending markets. In light of persistent pressures in these markets, the Bank announces additional steps to provide term liquidity through term Purchase and Resale Agreements (term PRAs).
First, the minimum amounts for term PRAs will be increased according to the following updated schedule, bringing the minimum total amount outstanding as at 6 November to $20 billion.
| Auction (Settlement) Date 1 | New Amount (millions) | Amount Maturing (millions) | Term (Days) | Maturity Date |
|---|---|---|---|---|
| October | ||||
| 7 (9) | $4,000 | 91 | 8 January | |
| 15 (17) | minimum $4,000 | $2,000 | 27 | 13 November |
| 21 (23) | minimum $3,000 | 91 | 22 January | |
| 28 (30) | minimum $4,000 | $4,000 | 28 | 27 November |
| November | ||||
| 4 (6) | minimum $3,000 | 91 | 5 February | |
Second, the Bank will conduct term PRAs on a weekly basis through to the end of the calendar year. The minimum sizes will be announced well in advance. The list of eligible securities for these transactions will be the same as the full list of securities eligible as collateral for the Bank's Standing Liquidity Facility (SLF): https://www.bankofcanada.ca/en/financial/securities.pdf.
Third, in recognition of market conditions, bank-sponsored asset-backed commercial paper (ABCP) that has met the Bank of Canada's criteria will be an eligible security for affiliated dealers on a temporary basis. The margin requirement for these securities will be 22.5 per cent, and will not be prorated according to the term of the security. (SLF eligible securities used in the term PRA transactions will be subject to the same margin requirements as those applicable in SLF transactions.)
Fourth, given the broadening of the list of securities eligible for these operations and the increased amounts outstanding, concentration limits for private sector securities will apply. Details of these limits will be announced with the call for tender on Monday, 6 October.
These term PRAs will be transacted with Primary Dealers (PDs). 2 Each PD will have a bidding limit of 25% of the auctioned amount and will be subject to a maximum aggregate of all outstanding Term PRAs. For PDs rated A or higher, the maximum aggregate limit will be 25% of the total outstanding; for PDs rated either BBB or lower or those without a rating, the limit will be 12.5%. Details of each operation will be announced by the previous business day.
The Bank will continue to provide term liquidity as long as conditions in financial markets warrant.
For further information, please contact:
Jill Vardy
613 782-8782