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A buoy on funding tides: How client repo demand and dealer constraints lifted CORRA

Author

Listed:
  • Jean-Sébastien Fontaine
  • Neil Maru
  • Sofia Tchamova

Abstract

The CORRA benchmark interest rate experienced sustained pressures in Canada around the Fall of 2025. The growing imbalance between repo lenders and borrowers meant that funding markets increasingly relied on Canadian banks’ balance sheets to absorb this funding gap. The Bank of Canada’s adjustments to its term repo operations, together with an eventual reduction in the imbalance between lenders and borrowers, both contributed to relieve pressures. The episode highlights that pressures on the CORRA benchmark can emerge from the interaction of client borrowing behavior and dealer balance sheet constraints, even if the level of settlement balances is in a range deemed sufficient to meet the requirement of the payment system and the precautionary demand of its members.

Suggested Citation

  • Jean-Sébastien Fontaine & Neil Maru & Sofia Tchamova, 2026. "A buoy on funding tides: How client repo demand and dealer constraints lifted CORRA," Staff Analytical Papers 2026-15, Bank of Canada.
    • Handle: RePEc:bca:bocsap:26-15
    DOI: 10.34989/sap-2026-15
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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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