The Bank of Canada is moving quickly to bolster Canadian funding markets. Ongoing asset purchases will now include up to C$50 billion of provincial bonds and C$10 billion of investment grade corporate bonds. The Bank of Canada also noted it would boost its money market holdings and expand its repo facilities. In reaction, corporate and provincial spreads tightened 10 to 20 basis points on Wednesday, April 15.

All of this demonstrates a comprehensive effort to keep financial markets functioning and credit flowing to critical sectors of the economy. The Bank of Canada has already acted aggressively in slashing rates to near zero and buying government bonds to blunt the effects of the pandemic.

Anticipating that provinces and companies will need to raise funds to cover shortfalls as the economy contracts, the Bank of Canada is assuring markets that it will act as the lender of last resort and support bond buying. It is clear that it will augment these efforts as conditions change, giving comfort of its understanding of the difficulties. On the same day, the Bank of Canada Monetary Policy Report highlighted that the economy is expected to contract this year, at its most severe rate ever.

While the purchase of large assets is unchartered territory for the Bank of Canada, it is moving quickly. It expects to have this expanded bond buying program in place in the coming weeks.

As always, we remain focused on assisting our clients during these challenging times. If you have any questions about your portfolio or our business continuity procedures, please do not hesitate to contact us.

This update may present materials or statements which reflect expectations or forecasts of future events. Such forward-looking statements are speculative in nature and may be subject to risks, uncertainties and assumptions and actual results which could differ significantly from the statements. As such, do not place undue reliance upon such forward-looking statements.