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Changes to the Bond Lending Facility - 24 July 2006

In consultation with the New Zealand Debt Management Office, The Reserve Bank of New Zealand today announced that, as from 24 July 2006, it will make the following changes to its Bond Lending Facility:

1. Counterparties will be able to borrow up to a total of $250 million of New Zealand government bonds each day via repo versus cash for same day settlement. Requests in excess of this $250 million limit must be settled against other New Zealand government securities, as per current practice. Market participants will still be able to borrow bonds for settlement the next day;

2. The Reserve Bank will operate a second Bond Lending Facility called the "RBNZ Repo Facility" that will offer to repo New Zealand government bonds to counterparties versus cash, via a tender. The tenders will be held at 9.30am on Monday, Wednesday and Friday. Other details of the tender are:

a) The Bank will repo up to $250 million of bonds in the "RBNZ Repo Facility";

b) The Bank will offer up to two maturity dates ranging from overnight to one week;

c) The maximum repo rate will be set at the Official Cash Rate less 70 basis points;

d) Settlement will be for value the same day.

e) The tender will close at 9.45am.

For more information on the operational details, please refer to the latest copy of the Reserve Bank's Operating Rules and Guidelines.

Operating rules and guidelines for domestic markets

The Reserve Bank expects that, by providing liquidity to the government securities repo market through these facilities, the functioning of the New Zealand government securities market will be enhanced.

These facilities will be available to counterparties who have signed an Inter-day Master Repurchase Agreement. Securities for the facility will be sourced from the Reserve Bank's New Zealand government bond portfolio.

The Reserve Bank reserves the right to review these operational facilities from time to time. These are technical adjustments and there are no monetary policy implications.

For further information contact:

Te Okeroa
Manager, Market Operations
[email protected]