The CMB purchase program is also dwarfed by the Bank's Government Bond Purchase Program (GBPP), as the chart below shows. "The central bank has pledged repeatedly that it will maintain the highest-profile of its emergency asset-buying programs – its minimum $5-billion-a-week purchases of Government of Canada bonds – until the [economic] recovery is well underway. It has also so far maintained its two programs to purchase provincial and corporate bonds, even though both programs' demand has been far below original expectations.
Mortgage rates in Canada have an 85% correlation with the 5-year Government of Canada bond yield, which has fallen sharply over the course of the pandemic crisis.
Bottom Line
Of the three programs being wound down in the bank’s latest announcement, the biggest is the expanded term repo program, under which the central bank has purchased more than $200-billion of the short-term bank financing instruments since mid-March. The program hasn’t generated any purchases since mid-September.
The Bankers' Acceptance Purchase Facility, involving short-term credit instruments typically used in international trade financing, was used heavily when introduced in March. Still, it hasn’t been tapped at all since late April. The central bank made about $47-billion in purchases under the program. However, all of those purchased assets have since reached maturity, meaning the central bank is no longer holding any bankers' acceptances on its balance sheet.
The Canada Mortgage Bond Purchase Program predates the pandemic, but the Bank of Canada ramped up its purchases dramatically during the crisis. Since mid-March, it has accumulated about $8-billion of the bonds under its emergency measures through twice-weekly purchases directly from Canada Mortgage and Housing Corp. The size of the bank’s typical purchases in the past couple of months has been less than a quarter of what it was routinely buying in the spring.
These changes in the QE program will have little impact on interest rates and mortgage markets. |