The tightening in Canada's overnight lending market that prompted a relatively large cash injection into system by the Bank of Canada is likely a reflection of the global tensions rather than anything domestic, says Doug Porter, deputy chief economist at BMO Capital Markets. The overnight repo rate was at 1.0370% Friday, up from 1.0062% Thursday, but below its recent high of 1.0597% on Apr 30. The bank's target is 1%. Large cash injections were frequent in the global financial crisis, when interbank lending tightened up despite the stability of the country's banking system. The measure does point out how quickly a central bank can react to potential systemic problems, Porter says. "Presumably other central banks have learned a lot of lessons, and will be quite proactive, as well," he says.
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