Bank of Canada could sell assets sooner than most

One challenge for central banks as they consider reducing the size of their balances sheets is that, if they sell assets bought during the pandemic, they will likely face a financial loss. This is less of an issue for the Bank of Canada because it has an indemnity agreement with the government to offset any losses. That indemnity will come in useful because, since the maturity profile of the Bank’s holdings is very uneven, it is hard to see how it can avoid selling assets if it wants to maintain an orderly run-down of its holdings.