CANADA
- There has been very little market reaction to BoC’s Gravelle announcing the Bank expects to end QT in 1H25, with a need to do so before a major bond maturity due Sep 1 (C$26.1bn), with GoC purchases not expected until toward the end of 2026.
- Can-US yield differentials are unchanged at -127bps for both 2Y and 10Y alike, off multi-decade lows closer to -140bps in early January but still historically depressed.
- The Bank has also lifted its target for settlement balances to C$50-70bn from previous estimates of C$20-60bn following market consultations.
Some highlights from Gravelle's speech:
- “When we make that announcement, we will also publish a market notice with more details about the asset acquisition process, including the timing of our initial purchases and expected amounts.”
- Their “business-as-usual” approach to balance sheet management will start with term repo operations. 1- and 3-momth terms, with bi-weekly operations amounts gradually ramped up.
- T-bill purchases will take place in the primary market, expected to resume in 4Q25, starting in small amounts through bi-weekly auction.
- GoC bond purchases “will likely not start until toward the end of 2026—at the earliest” with details well in advance nearer the time. The Bank will start purchases in the secondary market via reverse auctions.
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