The Globe and Mail reports in its Monday edition that Bank of Montreal analyst Benjamin Reitzes sees technical reasons for the Bank of Canada to trim its bond-buying program this week.
The Globe's Mark Rendell writes that the BOC, having purchased billions of dollars worth of Government of Canada bonds every week for the past year, owns more than 40 per cent of the market. Governor Tiff Macklem has said markets become impaired once central banks own between 50 per cent and 70 per cent of the bond supply.
With Ottawa expected to dial back emergency pandemic programs over the coming months, it will likely issue fewer bonds to finance the spending. That means the bank needs to slow its pace of buying in line with the lower issuance so it does not end up owning too much of the market.
Mr. Reitzes says, "I think they're very cognizant of that, and they just want to make sure that they don't do anything to impair the functioning of the market beyond what's absolutely necessary." The wild card on Wednesday is the BOC's forward guidance for rate hikes. The bank has said it will not raise rates until slack in the economy is absorbed and inflation is sustainably hitting its 2-per-cent target.
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