Bank of Canada scales back provincial bond-buying program

By Julie Gordon

OTTAWA, Feb 23 (Reuters) - The Bank of Canada scaled back the frequency of its provincial bond-buying program on Tuesday, saying that provincial credit markets are functioning well and no longer need as much support.

The central bank will now hold one reverse auction a week instead of two. Bloomberg News originally reported the change.

Bank of Canada spokesman Alex Paterson said in an email that the move is "consistent with the gradual reduction approach" for other programs that were introduced by the bank to stabilize the markets.

The Provincial Bond Purchase Program (PBPP) was launched last year to buy up to C$50 billion ($39.7 billion) of eligible provincial bonds to help boost market liquidity amid the COVID-19 pandemic. So far the Bank has taken up just C$17.4 billion worth.

The Bank of Canada has also been buying Government of Canada securities, or engaging in quantitative easing, in an effort to bolster the economy during the pandemic. In January, the central bank signaled it would reduce the pace of purchases from the current level of C$4 billion a week as it gains confidence in the strength of the recovery.

Bank of Canada Governor Tiff Macklem separately said on Tuesday that the central bank remains committed to its quantitative easing program until the economic recovery is well underway.

($1 = 1.2592 Canadian dollars) (Reporting by Julie Gordon in Ottawa, additional reporting by Fergal Smith; editing by Richard Pullin)