Document Type

Case Study

Case Series

Market Support Programs

JEL Codes

G01, G28


In the beginning of 2020, the outbreak of the novel coronavirus placed significant strain on financial markets and especially affected commodity-producing countries like Canada. As the broad economy contracted, oil-exports fell, and the government imposed public health restrictions to contain coronavirus, the Bank of Canada (BoC) announced emergency measures to ensure functioning of financial markets and to "reach companies and households and foster a robust recovery" (Poloz 2020, 1). One market that faced acute strain was the Canadian provincial bond market. The BoC announced the Provincial Bond Purchase Program (PBPP) through a notice published on April 15, 2020. The stated aim of the PBPP was "to maintain well-functioning provincial funding markets in the face of significant demands for funding as governments implement their emergency measures, and businesses and households seek to bridge this difficult period" (BoC 2020g). The PBPP was authorized to purchase up to CAD 50 billion of provincial bonds in the secondary market through primary dealers. The program was funded through settlement balances and the Government of Canada indemnified the program, along with other COVID-19 facilities. The PBPP's portfolio of provincial bonds reached a peak market value of CAD 17.6 billion on May 26, 2021. The PBPP had a minor impact on the overall size of the BoC balance sheet, but the announcement of the creation of the PBPP on April 15 had an immediate impact on provincial bond yields, which fell on average 21 basis points that day.

Date Revised