With a very low-key announcement on Thursday, the Bank of Canada scaled back the emergency measures it had put in place to ensure liquidity in financial markets. Specifically:
- The Bankers' Acceptance Purchase Facility and the Canada Mortgage Bond Purchase Program will both be terminated by the end of this month:
- Term Repo operations will move from weekly to twice monthly, effective from next week, and the range of securities eligible for these operations will be cut back. Only Federal or Provincial government securities will now be eligible.
Bank Governor Tiff Macklem signaled recently that the use of these facilities had dwindled sharply since the peak of the pandemic. The Bank's announcement observes that "overall financial market conditions continue to improve in Canada" , so these moves are not a surprise. Needless to say, however, the Bank stresses its continuing commitment to ensuring adequate liquidity in financial markets, up to and including a restart of the discontinued facilities "if necessary".
Although the second wave of the pandemic is well under way in Canada, there is no evidence of a return of the panic that gripped markets back in March and April. For now it seems unlikely that the Bank will have to take further emergency measures to support liquidity in the coming months.
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