Bank of Canada Staff Analytical Note 2024-26
by Patrick Aldridge, Jabir Sandhu and Sofia Tchamova
“We examine the trading behaviour of foreign central banks and its potential impact on liquidity in the Government of Canada (GoC) bond market. Our analysis builds on recent projects from staff at the Bank of Canada aimed at better understanding how asset managers can affect liquidity in Canadian fixed-income markets (Sandhu and Vala 2023; Bédard-Pagé et al. 2021). The Bank monitors liquidity in secondary markets and has different tools to support liquidity in certain circumstances. This is because liquid and well-functioning fixed-income markets are important for the transmission of monetary policy and the stability of the financial system.”