The Bank of Canada is announcing several operational enhancements to improve liquidity in the government debt market.

In August 2001 consultations were held with market participants on potential initiatives geared towards enhancing liquidity of the Government of Canada securities market and broadening participation in debt operations. Based on feedback received from the consultation process, several operational adjustments will be made.

To reduce market risk for participants and encourage broader participation, the submission deadline for regular Government of Canada bond buyback operations will be changed from 14:00 ET to 13:15 ET, starting October 10. The change will reduce the time gap between the release of auction results (now at 12:45 ET) and the buyback operation from 1:15 hours to 30 minutes.

To stimulate the participation of existing securities holders in buyback operations, the government will implement buyback operations using the switch method on a trial basis. These operations will be conducted in addition to regular buybacks that occur on auction days and will offer market participants the opportunity to convert their holdings of less-liquid government bonds into a corresponding benchmark bond. Operational details will be announced at a later date. The first pilot operation is planned to be conducted early in the fourth quarter of this fiscal year.

To enhance the effectiveness of the current Cash Management Bond Buyback pilot program, the threshold which the government will not reduce the outstanding amount of bonds maturing on any given target date is being reduced from $6 billion to $4 billion. This change is effective immediately.