Change in Minimum Bank of Canada Nominal Bond Purchases at Auctions

In managing its balance sheet, the Bank of Canada acquires Government of Canada securities to offset its liabilities, which consist mainly of bank notes in circulation and deposits. In order to minimize the potential market distortions from its investment activities, the Bank acquires these securities on a non-competitive basis at auctions and structures its holdings to broadly reflect the composition of the federal government’s stock of nominal domestic marketable debt.  As outlined in the Bank of Canada’s policy governing the acquisition and management of financial assets for its balance sheet, the Bank typically acquires a fixed percentage of the amount of nominal bonds being auctioned, with the amount of treasury bills purchased reflecting the Bank of Canada’s balance sheet needs at the time of each auction.

The Bank of Canada is increasing its minimum purchases of nominal bonds at auctions to 20 per cent from the current 15 per cent level, effective immediately, in order to accommodate the projected increase in the Bank’s liabilities. This change is being made to accommodate the planned increase in government deposits held at the Bank of Canada associated with the Government of Canada’s plan announced in the June 2011 budget to increase its prudential liquidity over the next 3 fiscal years.

This change is for balance-sheet purposes only and has no implications for monetary policy or financial stability.

The Bank will continue to indicate its intentions for minimum purchases on the Call for Tenders for each offering of nominal bonds. The Bank’s holdings of maturing nominal bonds, if any, will also be published.

For further information, contact:

Jeremy Harrison
Media Relations
Bank of Canada
613 782-8782