Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/337171 
Year of Publication: 
2025
Series/Report no.: 
Bank of Canada Staff Discussion Paper No. 2025-14
Publisher: 
Bank of Canada, Ottawa
Abstract: 
In 2024, the overnight funding market experienced sustained pressure and the benchmark Canadian Overnight Repo Rate Average (CORRA) rose to 7 basis points above the Bank of Canada's target overnight rate. Settlement balances were declining, but hedge fund borrowing also grew by over $30 billion, increasing the client share of total repo volumes. With limited balance sheets and substantial market power, dealers raised clients' rates, which increasingly influenced CORRA. Overall, this episode highlights the effect that dealers' balance sheet constraints and bargaining power have on where CORRA settles but downplays the role of the settlement balances channel in the dealerto-client market.
Subjects: 
Financial markets
Interest rates
Monetary policy implementation
Market structure and pricing
Financial institutions
JEL: 
D4
D53
E43
E44
E52
G12
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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