The Bank of Canada reports that temporary measures to reinforce the target for the overnight rate remain in effect, and have recently been utilized.

In a notice, the Bank reports that last March,it announced temporary measures to reinforce its target for the overnight rate. “Specifically, the Bank announced that it would reduce the target for settlement balances to zero and, on a temporary basis, no longer commit to neutralizing all of the Sale and Repurchase Agreements (SRA) conducted,” it explains. “These measures were taken in response to the rate on overnight general collateral (overnight loans that are secured by government securities) consistently trading below the Bank’s target for the overnight rate.”

Beginning in early February this year, the rate on overnight general collateral again began to consistently trade below the Bank’s target for the overnight rate, it reports. The temporary measures introduced in March 2006 remain in place, and will continue to be used to reinforce the Bank’s objectives for the overnight interest rate, it says.

“Towards that end, the SRA operations held on February 13 and 14 were not fully neutralized, with the result that the system was left in a deficit position on both days. In addition, to further reinforce the target for the overnight rate, the Bank is prepared to enter into SRAs outside of the regular 11:45 a.m. intervention time, including earlier in the morning,” it adds.