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Canada: Corporate Bond Purchase Program

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Abstract

The Bank of Canada (BoC) activated its Corporate Bond Purchase Program (CBPP) from May 26, 2020, to May 26, 2021, in response to liquidity strains in corporate bond markets that stemmed from economic uncertainty and the COVID-19 pandemic. Policymakers enacted the CBPP as part of a broader suite of policies meant to stabilize the Canadian economy. Through the CBPP, the BoC purchased Canadian corporate bonds through a tender process on the secondary market. The CBPP could hold up to CAD 10 billion (USD 7.7 billion) par value of eligible bonds issued by specific non-deposit-taking firms incorporated in Canada. The bonds had to meet certain rating requirements, though the BoC allowed certain bonds downgraded after the start of the pandemic to remain eligible. The BoC would not purchase more than 10% of the par value of eligible assets that were outstanding on April 15, 2020 from a particular eligible issuer. CBPP utilization peaked at CAD 218 million in bonds on March 24, 2021. Assets from the financial and energy sectors made up most of the BoC's corporate bond holdings. Corporate bond market liquidity improved rapidly after the CBPP's implementation.

Suggested Citation

  • Nunn, Sharon, 2022. "Canada: Corporate Bond Purchase Program," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 4(2), pages 1480-1503, April.
    • Handle: RePEc:ysm:ypfsfc:v:4:y:2022:i:2:p:1480-1503
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    File URL: https://elischolar.library.yale.edu/cgi/viewcontent.cgi?article=1357&context=journal-of-financial-crises
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    Cited by:

    1. Metrick, Andrew, 2022. "Market Support Programs: COVID-19 Crisis," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 4(2), pages 179-219, April.

    More about this item

    Keywords

    Canada; CBPP; corporate bond purchase; COVID-19; market liquidity programs;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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