The Bank of Canada says that with financial markets returning to normal, it is backing off one of the steps it took to ensure liquidity by restoring the standard terms for Special Purchase and Resale Agreements.

“While money markets continue to experience difficulties, there has been significant progress in the functioning of the overnight market,” the Bank says, noting that, since August 17, the overnight rate has been below the Bank of Canada’s target rate and no SPRAs have been required.

As a result, it is reverting to the standard terms for SPRA, accepting only Government of Canada securities. Back on August 15, it expanded the list of collateral eligible for use by market participants in SPRAs to include all securities that are already eligible as collateral for the Bank’s Standing Liquidity Facility provided to participants in the Large Value Transfer System.

“The Bank of Canada continues to closely monitor financial market developments and the need for the provision of liquidity,” it says, adding that it is committed to providing liquidity in support of the efficient functioning of financial markets.