Technical note

From 25 September 2000 the Reserve Bank will offer to repo portions of its holdings of New Zealand Government Bonds, as a mechanism to withdraw short-term liquidity (generally for terms of one to thirty days) from the banking system, in its daily liquidity management operations. Repo transactions will supplement the current withdrawal instrument, seasonal Treasury bills, and will be offered either solely, or in conjunction with the seasonal Treasury Bills. This instrument is designed to improve the efficiency of liquidity management and does not represent any change in approach to "squeezes" in particular bonds.

Repo transactions will only be available to the Reserve Bank's counterparties who have executed an Inter-day Master Repurchase Agreement and signed the revised Annex to that agreement.

The Reserve Bank has set aside $100 million of each bond held in its portfolio for repos. The Reserve Bank will not repo bonds when there are two days or less from the maturity date of the repo transaction to the maturity date of the bond, or if the term of the repo transaction crosses the books close date for the bond. Bids will be for the amount of cash bidders want to provide to the Bank and each bid will need to be bond specific. The allocation of successful bids will be subject to bond availability. The availability of bonds, and results of repo transactions, will be advised via screen release in the usual manner. This information will be posted on the page following the current OMO details/results.

For more information on the operational details, counterparties should refer to the latest copy of our `Operating Rules and Guidelines', which were posted out earlier this week.

For further information please contact
John Groom (04) 471 3784 or Tina Sutherland (04) 471 3970

ENDS 22 September 2000