As announced on April 13, 2022, the Bank of Canada is ending the reinvestment phase of its asset purchase program and beginning quantitative tightening (QT). With the initiation of QT, maturing Government of Canada bonds will no longer be replaced and as a result, the size of the balance sheet will decline over time. The Bank is not actively considering selling bonds.
Effective April 25, 2022, the Bank will not be purchasing Government of Canada bonds in the primary or secondary markets. Accordingly, the final Government of Canada Bond Purchase Program operation will be held on April 21, 2022, in the 10-year sector, as previously announced. The Bank will stop purchasing Government of Canada bonds at auctions after the 10-year bond auction scheduled on April 21, 2022.
The Bank is also announcing that it will continue to implement monetary policy via a floor system—where the interest rate on the overnight deposit facility is equal to the target for the overnight rate. The floor system will remain in place even after quantitative tightening has run its course and the balance sheet has diminished in size to the point where the Bank needs to start acquiring assets again for normal balance sheet management purposes.
The longer-run level of settlement balances is yet to be determined, but it is far lower than the current level. The new range will be established based on a range of money market indicators, including market-based measures of the overnight rate, as well as input from external stakeholders.
Director
Financial Markets Department
Bank of Canada
613‑782‑7723
Director
Financial Markets Department
Bank of Canada
613‑782‑7245
Media Relations
Bank of Canada
Source(s):
Government of Canada Bond Purchase Program