Evidence of meeting #204 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was economy.
A video is available from Parliament.
11:20 a.m.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
Could we also get a breakdown?
When you purchase them, do they come from regulated lenders like the chartered banks or do they come from...?
11:20 a.m.
Senior Deputy Governor, Bank of Canada
I will get you all that information. I can just tell you that our principles for anything that we purchase are heavily focused on mitigating any risk that we might have on our own balance sheet and also mitigating any impact we may have on the market. Market neutrality is a very important principle that we follow.
11:20 a.m.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
How do you do that? There's a bidding system involved here, so if you're not competing, it's on a non-competitive basis.
11:25 a.m.
Senior Deputy Governor, Bank of Canada
For Government of Canada bonds...?
11:25 a.m.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
Do people not know that you're the ones buying them? Do you do it through an agent?
11:25 a.m.
Senior Deputy Governor, Bank of Canada
I can tell you that for the Government of Canada bonds, we take up part of the auction. Exactly what I was trying to say earlier, when I talked about.... You know that you can take up a certain share of an auction or a certain share of what's actually being offered before you start affecting the price. Once you get too much of that as a share, then you start affecting the price, so we try to take that into account. I think it's impossible for us not to have any impact on the market, but we try to mitigate it.
With respect to our actual plans, I think it's—
11:25 a.m.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
I'm sorry. I'm going to interrupt you because I only have seven minutes.
11:25 a.m.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
On these Canada mortgage bonds—this is the product that you're going to the market for—what's your upper limit? You said it would be a small portion of your balance sheet. What is “small” for the Bank of Canada?
11:25 a.m.
Senior Deputy Governor, Bank of Canada
That's a really good question. I don't actually have a number in my head, but it would be a much smaller proportion than the Government of Canada's that we purchase. That, of course, would change over time because, again, the reality is that what the government issues, their debt issuance, is dependent on their funding needs for any particular year.
When the funding needs are bigger, it's easier to take a bigger share of that Government of Canada market. When they're smaller, which they have been in other years, then we have to adjust. That proportion would change over time, but we certainly have guardrails around that, and I can get those to you.
11:25 a.m.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
Would the guardrail be a percentage of total share? Do you have that number somewhere at the Bank of Canada?
11:25 a.m.
Senior Deputy Governor, Bank of Canada
We would have guidelines around that in our balance sheet management process.
11:25 a.m.
Conservative
11:25 a.m.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
If you weren't buying Canada mortgage bonds, you'd be buying treasury bills or something else.
11:25 a.m.
Senior Deputy Governor, Bank of Canada
It's absolutely not.... It is entirely for balance sheet management purposes. It's not even close to a form of quantitative easing.
11:25 a.m.
Conservative
11:25 a.m.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
I have another question. This was put out in November, and by the end of December, you had already purchased them. How long were you considering doing this before you put out a notice ahead of time? I'm guessing you did some analysis internally.
11:25 a.m.
Senior Deputy Governor, Bank of Canada
Yes, we did some analysis. We've been doing this analysis off and on for a number of years, in anticipation of knowing that we would have to take up too much of the market. We also considered other instruments. That analysis would have been done and approved by the governing council well before it was actually implemented.
11:25 a.m.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
You said you're very careful to ensure that you don't affect the market and the price that is obtained at the end, not to move the price.
11:25 a.m.
Conservative
Tom Kmiec Conservative Calgary Shepard, AB
When you're purchasing them, people don't know that you're doing it. Do you purchase them through an agent you hire?
