00000nam 2200000zi 4500 9.944012 CaOODSP 20250821075126 m o d f cr mn||||||||| 241010t20242024onca ob f000 0 eng d CaOODSP eng rda CaOODSP eng eng fre n-cn--- FB3-7/2024-21E-PDF Plong, Boran, author. CORRA : explaining the rise in volumes and resulting upward pressure / by Boran Plong and Neil Maru. [Ottawa] : Bank of Canada = Banque du Canada, 2024. ©2024 1 online resource (iii, 19 pages) : colour illustrations. text txt rdacontent computer c rdamedia online resource cr rdacarrier Staff analytical note = Note analytique du personnel, 2369-9639 ; 2024-21 "Last updated: August 15, 2024." Includes bibliographical references (page 19). "The Canadian Overnight Repo Rate (CORRA) measures the cost of overnight general collateral Canadian-dollar repurchase agreements (repos). Since late May 2024, the volume of trades that make up CORRA has increased and remained elevated. At the same time, CORRA started being consistently above the Bank of Canada's policy interest rate. This upward pressure results entirely from industry-wide changes to the settlement period for cash bond trades on the secondary market, from two days to one. The change in the settlement period prompted a rise in volumes in the overnight repo market (which is CORRA-eligible) from the tomorrow-next repo market (which is not CORRA-eligible). In addition, this move has overwhelmingly been one way: demand from hedge funds to fund their long bond positions. This demand existed before but was always traded in the tomorrow-next market and thus activity in the tomorrow-next repo market has been decreasing by an amount comparable to the increase in the overnight market. We find this mechanical effect has accounted for up to 3 basis points of upward pressure on CORRA. We find no indications that any other factors are contributing to this pressure. Given the new dynamics since May, the Bank has amended the terms of its overnight repo operations. It has also subsequently conducted a series of operations to help reinforce the target for the overnight rate, which had deviated away from the Bank's policy rate due to this mechanical adjustment. Overnight repos are routine operations that are part of the Bank's operational framework for implementing monetary policy and reinforcing the policy interest rate"--Abstract, page ii. Includes abstracts in English and French. Interest rates Canada. Commercial loans Canada. Derivative securities Canada. Monetary policy Canada. Taux d'intérêt Canada. Prêts commerciaux Canada. Instruments dérivés (Finances) Canada. Politique monétaire Canada. Bank of Canada, issuing body. Staff analytical note (Bank of Canada) 2024-21. (CaOODSP)9.807323 PDF 468 KB https://publications.gc.ca/collections/collection_2024/banque-bank-canada/FB3-7-2024-21-eng.pdf