The briefing note from late last year appears to gloss over the bond-buying program despite the extraordinary effect it was having on debt yields.
The central bank has encouraged interest rates at historic lows since the pandemic began by keeping its key rate at near-zero and purchasing federal bonds at an unprecedented pace. The Bank of Canada is widely expected to reduce its weekly purchases of federal bonds as part of a scheduled rate announcement on Wednesday morning.
If it pulls back from purchases, demand for federal bonds would drop and rates would rise, which could affect the costs for the federal government to refinance billions in debt coming due. Rebekah Young, director of fiscal and provincial economics at Scotiabank, says the connection to the debt means the central bank will have to clearly explain any changes in bond purchases so markets don't worry decisions are being made to help federal finances.The Bank of Canada in Ottawa on Tuesday, Dec. 15, 2020. THE CANADIAN PRESS/Sean Kilpatrick