Bank of Canada can buy corporate, municipal bonds if necessary

FILE PHOTO: Bank of Canada Governor Stephen Poloz speaks while attending a luncheon for Women in Capital Markets (WCM) in Toronto, Ontario, Canada March 5, 2020. REUTERS/Chris Helgren

OTTAWA (Reuters) - The Bank of Canada has said that if necessary it can buy corporate and municipal bonds to bolster liquidity in the credit markets as the new coronavirus puts the brakes on the global economy.

In a regulatory notice published in the Canada Gazette last Wednesday, Governor Stephen Poloz said he broadened the central bank’s policy for buying and selling securities to include “Canadian dollar corporate, municipal and covered bonds issued by Canadian or foreign entities.”

Such “exceptional transactions” will come into effect on Wednesday, the Gazette said. It is the latest measure the central bank has taken to ensure liquidity amid the global slowdown after having slashed interest rates twice in nine days.

The Bank of Canada will be able to buy or sell or participate in buybacks involving corporate and municipal debt “for purposes of addressing a situation of financial system stress that could have material macroeconomic consequences or for purposes of implementing monetary policy,” the Gazette said.

The bank has also broadened eligible collateral for its term repo facility to include the full range of collateral eligible under the Standing Liquidity Facility, and has said it would extend its bond buyback program across all benchmark maturity sectors.

Reporting by Steve Scherer; Editing by Peter Cooney