The first auction of a new one-month Treasury bill will take place in early May, the Bank of Canada says.

The new one-month T-Bill, announced in the latest federal budget, is being introduced to plug a gap created by financial benchmark reforms. It will replace Bankers’ Acceptances, which are being phased out as part of the reform that will see the benchmark, the Canadian Dollar Offered Rate (CDOR), discontinued at the end of June.

On Wednesday, the Bank of Canada announced that the first auction of the new instrument will take place on May 7.

“The one-month Treasury bill will act as a partial substitute for investors of one-month BAs while private sector one-month investment alternatives are expanded and/or introduced,” the central bank said.

The T-bill is being introduced for one year, subject to its reception by the market.

If demand is weak, the government may cut the program early. Alternatively, it could make the new vehicle a permanent feature of the money market, if demand proves to be strong.

“Continued issuance of one-month Treasury bills will be assessed and determined based on factors such as market need and efficiency as a funding tool for the government of Canada,” the budget noted.

To start, one-month T-bill auctions will take place bi-weekly, at noon on Tuesdays, in line with the existing T-bill auctions.

“Auction sizes are expected to be adjusted to reflect demand conditions,” the Bank of Canada said.