Today the Bank confirmed that monetary policy will continue to be implemented via a floor system where the interest rate on the deposit facility is equal to the target for the overnight rate. To reinforce the Bank’s overnight target rate in a floor system with excess settlement balances, the Bank is also announcing changes to its Overnight Reverse Repo (ORR) operations.
Effective March 3, 2022, all ORRs will be conducted under the Overnight Reverse Repo Operations: Terms and Conditions – Fixed Rate, Full Allotment and will no longer be uniform price auctions. They will instead be conducted on a fixed rate and full allotment basis, up to the predetermined limit for each eligible counterparty and with the ORR rate set to the Bank’s prevailing target for the overnight rate. Each counterparty is subject to a maximum tender per operation of $4 billion less any amount the counterparty has transacted that day in the Bank’s Securities Repo Operation (SRO). The ORR limit will be provided to each counterparty ahead of each ORR operation, conducted from 10:30-10:45 ET each day that they are offered. In line with today’s increase to the target for the overnight rate, the maximum bid rate for the SRO will move to 40bps from the current 15bps. There are no other changes to the SRO, which will continue to be conducted daily from 9:30-10:00 ET.
Overnight Repo (OR) operations are unaffected by these changes to ORRs. The OR provisions of the Overnight Repo and Overnight Reverse Repo Operations: Terms and Conditions will continue to apply to ORs.
The Bank conducts Overnight Repo and Overnight Reverse Repo operations to further support the effective implementation of monetary policy by injecting or withdrawing intraday liquidity, complementing standing deposit and lending facilities. SROs provide a temporary source of specific Government of Canada nominal bonds and treasury bills to primary dealers to support liquidity in the securities financing market.
The Bank will monitor these operations and market developments. At its discretion, the Bank will adjust operation parameters and consider other measures, as warranted, to support its monetary policy objectives in a floor system while promoting market well functioning.
Director
Financial Markets Department
Bank of Canada
613‑782‑7723
Director
Financial Markets Department
Bank of Canada
613‑782‑7245
Director
Financial Markets Department
Bank of Canada
403‑956‑4532
Media Relations
Bank of Canada