Price Caps in Canadian Bond Borrowing Markets

Léanne Berger-Soucy, Jean-Sebastien Fontaine and Adrian Walton

No 2019-2, Staff Analytical Notes from Bank of Canada

Abstract: Price controls, or caps, can lead to shortages, as 1970’s gasoline price controls illustrate. One million trades show that the market for borrowing bonds in Canada has an implicit price cap: traders are willing to pay no more than the overnight interest rate to borrow a bond. This suggests the probability of a shortage increases when interest rates are very low.

Keywords: Financial; markets (search for similar items in EconPapers)
JEL-codes: G10 G12 (search for similar items in EconPapers)
Pages: 8 pages
Date: 2019-01
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Citations: View citations in EconPapers (3)

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