MNI BRIEF: Text of BOC Market Notices On QT And Deposit Rate
MNI (OTTAWA) - Bank of Canada announces an adjustment to the deposit rate and some changes to terms and conditions for Overnight Reverse Repo Operations
January 29, 2025
The Bank announced it is making an adjustment to the deposit rate. Effective January 30, the deposit rate will be set at a spread of 5bps below the Bank’s policy interest rate. This change to the monetary policy implementation framework is being made to improve its effectiveness. The intent of this change is to improve the circulation of settlement balances as they decline towards steady state levels over the coming months and support the functioning of short-term funding markets. Adjusting the deposit rate should also help mitigate some of the upward pressure that has been seen on the overnight rate relative to the Bank’s target rate in recent months and help reinforce the effect of the Bank’s Overnight Repo (OR) operations.
Occasional adjustments to the deposit rate spread may be required in the course of normal operations. These spread adjustments would be considered, among other factors, following a period of sustained and persistent upward, or downward pressure, on CORRA and would be communicated via a market notice. We will assess the impact of this change as the balance sheet continues to evolve and evaluate the need for any additional adjustments to our implementation framework.
In addition, the Bank is realigning its framework for Overnight Reverse Repo (ORR) operations with that of OR operations. Effective January 30, when they are required, ORR operations will be conducted through a uniform price auction with an aggregate cash value amount offered in each operation of a minimum of $8 billion and individual dealer limits for each ORR of $3 billion.
Scott Kinnear
Director
Financial Markets Department
Mark de Guzman
Director
Financial Markets Department
Bank of Canada provides operational details for restarting asset purchases to end quantitative tightening
January 29, 2025
Today, the Bank of Canada is announcing its plan to complete its balance sheet normalization, ending quantitative tightening. Beginning in early March, the Bank will begin purchasing assets as part of normal balance sheet management. Purchases are intended to replace maturing assets, to offset the growth of currency notes in circulation and to stabilize settlement balances within a range over the course of the year.
Asset purchases will begin with the restart of the regular term repo program, followed by Government of Canada (GoC) treasury bill purchases to restore a more balanced mix of assets on the Bank’s balance sheet.
As such, the Bank will restart its term repo program effective March 5, 2025 and operations will be conducted every two weeks. Terms will alternate between 1-month operations and 1- and 3-months operations depending on the week. Initially, term repo operations will range between $2bln and $5bln. The sizes will increase over time as the Bank’s needs for additional assets grow. Final operational details, including the size and specific maturity date of the term repos, will be published one week prior to the operation date.
Treasury bill purchases will resume later this year and be conducted via GoC auctions. Purchase amounts will be announced via the regular call for tender process. The timing for the resumption of treasury bill purchases will ultimately depend on the evolution of the Bank’s balance sheet, including take-up of the term repo program.
Purchases of GoC bonds will likely not need to start until towards the end of 2026 at the earliest based on current projections for the Bank’s future asset needs. When they begin, they will be conducted in the secondary market. A subsequent market notice containing operational details will be published well in advance.
Scott Kinnear
Director
Financial Markets Department
Mark de Guzman
Director
Financial Markets Department