The Dealer-to-Client Repo Market: A Buoy on a Swaying Sea

Greg Adams, Evan Dudley, Jean-Sebastien Fontaine, Sofia Tchamova and Andreas Uthemann

No 2025-14, Discussion Papers from Bank of Canada

Abstract: In 2024, the overnight funding market experienced sustained pressure and the benchmark Canadian Overnight Repo Rate Average (CORRA) rose to 7 basis points above the Bank of Canada’s target overnight rate. Settlement balances were declining, but hedge fund borrowing also grew by over $30 billion, increasing the client share of total repo volumes. With limited balance sheets and substantial market power, dealers raised clients’ rates, which increasingly influenced CORRA. Overall, this episode highlights the effect that dealers’ balance sheet constraints and bargaining power have on where CORRA settles but downplays the role of the settlement balances channel in the dealer-to-client market.

Keywords: Financial markets; Interest rates; Monetary policy implementation; Market structure and pricing; Financial institutions (search for similar items in EconPapers)
JEL-codes: D4 D53 E43 E44 E52 G12 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2025-11
New Economics Papers: this item is included in nep-mon
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