The Bank of Canada building in Ottawa. Photo by HYUNGCHEOL PARK/Postmedia files

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Bank of Canada deputy governor Toni Gravelle said the central bank is trying to reduce upward pressure on CORRA by regularly increasing the size of its two-week repo operations.

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Gravelle outlined how the central bank is addressing the upward drift of CORRA — the Canadian Overnight Repo Rate Average — at the Bloomberg Canadian Finance Conference in New York on Tuesday.

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The deputy governor said that while the central bank doesn’t want to react to every deviation in CORRA, it can “tolerate only so much upward pressure.”

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CORRA measures the cost of overnight money using Canadian government treasury bills and bonds as collateral for repurchase transactions. It’s supposed to closely track the central bank’s target for the overnight rate. When it doesn’t, it can be a signal that short-term funding markets aren’t functioning as smoothly as they should.

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“We now regularly increase the size of our two-week repo operations to get ahead of expected or seasonal pressures around quarter-end reporting dates for Canadian banks or large government bond maturities,” Gravelle said. “Supplying extra term cash in the repo market in this way helps reduce the likelihood of upward CORRA pressure.”

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The remarks follow multi-year liquidity strains in Canada’s overnight repo markets, which had regularly pushed CORRA above the central bank’s target for the benchmark interest rate.

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Those pressures intensified as the Bank of Canada shrunk its balance sheet during quantitative tightening, prompting policymakers to try reviving repo auctions, lowering the deposit rate, and other means of relief. Settlement balances are above the bank’s estimated steady-state range, and funding strains still emerge when liquidity demand spikes among major lenders and market participants. On Tuesday, CORRA was priced five basis points above the bank’s target for the overnight rate.

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The central bank added two-week term repo operations to its toolkit in October 2025.

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The Bank of Canada also issued a joint statement with the Office of the Superintendent of Financial Institutions aimed at alleviating concerns about the use of the Standing Liquidity Facility, or SLF, which gives participants of the Lynx payment system access to secured liquidity.

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The statement stressed that both institutions consider SLF use “to be consistent with routine liquidity management activities,” and not an exceptional measure.

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In his remarks, Gravelle said the statement was issued because some financial institutions worry that using the SLF could “send the wrong signal.” He said they should instead feel comfortable using it for unexpected shortfalls in end-of-day liquidity, rather than holding extra reserves for this scenario.

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He also confirmed that the central bank will start using the Canadian Collateral Management Service — a platform that automates parts of repo transactions to cut inefficiencies — in the first quarter of 2027. The central bank previously announced plans to join the platform, as well as its intention to eventually centrally clear its own repo operations using the Canadian Derivatives Clearing Corporation.

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