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We find that the rise in Government of Canada debt issuance correlates to growing participation of hedge funds in bond auctions since 2020. This increased participation supports the cost-effective distribution of Canada’s debt, but it also represents a potential vulnerability because hedge funds have a greater flight risk than other investor types.

This paper looks at the role mortgage brokers play in helping borrowers generate quotes and qualify for credit. We find that, on average, borrowers that engage with a mortgage broker pay lower interest rates. However, in about 15% of cases, borrowers are steered towards longer amortizing mortgages than they would have chosen absent a broker. Since mortgages with longer amortization have higher total interest costs over the entire life of the mortgage, this steering is expensive.

The Bank of Canada’s Merchant Acceptance Survey finds that 96% of small and medium-sized businesses in Canada accepted cash in 2023. Acceptance of debit and credit cards has increased to 89%, and acceptance of digital payments has also increased. However, Canada is far from being a cashless society.

We investigate the welfare consequences of consumer credit regulation in a dynamic, heterogeneous-agent model with endogenous lender market power. Lenders post credit offers and borrowers—some informed and others uninformed—apply for credit. We calibrate the model to match characteristics of the unsecured consumer credit market and use the calibrated model to evaluate interest rate ceilings.

Dealers connect investors who want to buy or sell securities in financial markets. Over time, dealers and investors form trading networks to save time and resources. An emerging field of research investigates how networks form.

Consumers, businesses and banks make millions of payments each day using a variety of instruments, such as debit cards, cheques and wires. Canada is currently developing three new systems to process these transactions: Lynx, Settlement Optimization Engine (SOE) and Real-Time Rail (RTR).

The premium on “on-the-run” Treasuries is an anomaly. I explain it using a model in which primary dealers hold inventories of Treasuries. I use the model to analyze the effects of granting access to central bank facilities.

The world needs an international institution to promote a new monetary order—a well-functioning, market-based global financial system. This will be the subject of my remarks today.

The Governing Council judges that the risks to the Canadian financial system have decreased somewhat relative to the December FSR, but that the overall level of risk remains high. The key risks are similar to those highlighted in December, and emanate primarily from the external environment.

G-20 representatives, academics, market participants, and members of international financial institutions were brought together in Ottawa to explore the connection between robust financial markets and economic growth and development, share experiences, and to develop policy recommendations, where possible. Participants identified several areas they deemed critical for fostering strong domestic financial markets and reducing external vulnerability: sound macroeconomics policies, strengthened financial infrastructures and banking systems, and exchange rate flexibility for countries with widely open capital accounts. Papers presented in the six sessions and keynote address highlighted a number of issues, including currency mismatches, the sequence of financial liberalization and supervisory reforms, the development of local financial markets, infrastructure building and governance, and appropriate incentives.