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Tiago Figueiredo
Macro Strategist
Quantitative Tightening: Diet to End Next Year, but Bonds Not on the Menu until 2026
The Bank of Canada has been on a strict diet—and it’s been working. Since the beginning of its quantitative tightening program (QT) over two years ago, the Canadian central bank has cut its balance sheet in half, rapidly reducing settlement balances from their previously bloated levels. Still, the Bank is looking to shed more weight, and QT will likely continue until at least April of next year. By then, the Bank of Canada will have shaved off an additional C$26B in bond holdings and is projected to own just 18% of outstanding Government of Canada bonds, down from a peak of almost 45%. However, even when QT ends, it could take time for the Bank to begin buying bonds again. That will put more pressure on the private sector to absorb the expected record level of incoming bond supply.