The Bank of Canada is planning to buy mortgage-backed securities for the first time following a periodic review of its balance sheet management.
The bank wants to expand the securities it holds to offset its liabilities (largely bank notes in circulation and Government of Canada deposits).
The bank is now expanding the assets it acquires outright to include the purchase of federal government guaranteed-debt securities issued by federal Crown corporations.
This will include a small portion of debt backed by the CMHC and purchases will be conducted in the primary market, likely in the remaining weeks of 2018 or early in 2019.
“The Bank plans to allocate a small portion of its balance sheet for acquiring federal government guaranteed securities by purchasing Canada Mortgage Bonds,” the BoC statement says.
It added that it “will continue to adhere to its principles of neutrality, prudence and transparency and conduct its transactions in a manner that limits market distortions and minimizes impact on market prices.”
It says this will have no implication on monetary policy or financial stability of the bank.