The Bank of Canada has announced a change to the pricing of the securities repo operations (SRO).
The maximum bid rate in the SRO will be set at 15 bps below the Bank’s target for the overnight rate, effective January 30, 2023. This change follows a previous increase of the SRO maximum bid rate (to 10 bps below the target rate), which took place in January 2021 during a period of increased specialness in the repo market for Government of Canada (GoC) securities.
The Bank’s holdings of GoC bonds are continuing to decline through quantitative tightening, and the Bank no longer holds some of the most liquid securities. With daily SRO usage trending lower alongside a moderation in GoC repo specialness, the lower maximum bid rate allows more room for private sector transactions to take place while continuing to support the functioning of the securities financing market.
Other parameters of the program, including counterparty limits, remain unchanged.