RBC Comments on Bank of Canada's QT

08:26 AM EDT, 09/10/2025 (MT Newswires) -- The Bank of Canada announced the end of quantitative tightening (QT) at its Jan. 29 meeting, alongside an extra 5bps cut in the deposit rate (-30bps in total), noted RBC.

Term repos started on schedule in early March and have been running every two weeks since then. Take-up has been on the low side, with no fully subscribed operations, said the bank.

When the BoC announced the end of QT, it would have been fair to assume that asset levels would remain relatively constant thereafter -- at least once term repo operations commenced in March, stated RBC. However, there is no discernible change in the trend for BoC assets since that announcement.

Long periods of steady asset levels followed by discrete drops on maturity days continue to be the trend, pointed out the bank.

Overall, BoC assets -- mostly bonds -- have decreased from $258 billion at the end of February to $220 billion post-September maturity, added RBC. "Clearly" then, the $11.3 billion of term repo take-up hasn't been enough to offset the sizable maturities.

To be balanced here, the BoC has made much more cash than that available through term repos -- offered amount of $27 billion for outstanding maturities -- and the decline in their asset level has taken Lynx to the top-end of their desired $50 billion-$70 billion range -- though below RBC's steady-state estimate of $85 billion.

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