Large-Scale asset purchases

Page updated: 7 December 2020

This page provides details of our Large-scale asset purchases (LSAP) programme, what we will buy and when, and our key decisions and announcements for the programme.

How the programme works

The aim of the programme is to lower borrowing costs to households and businesses by injecting money into the economy.

When we buy assets, this increases their price and so reduces their yield. That means the interest rate, in this case on government bonds, fall. This has the effect of ‘lowering the tide’ on other interest rates in the economy, particularly longer-term interest rates of two years or more. It also reduces the cost of borrowing for households and businesses.

Secondly, when we buy these government bonds, it encourages the sellers of assets to use the money they receive from us to switch into other financial assets like company shares, bonds, or new lending – helping to inject money into the economy.

What we will buy

We will buy up to $100bn of NZ Government Bonds, Local Government Funding Agency (LGFA) Bonds and New Zealand Government Inflation-Indexed Bonds in the secondary market by June 2022.

We will publish a weekly schedule on the amount of bonds we intend to buy through an auction process. This schedule is reviewed regularly and adjusted as needed to ensure the programme is working as we intended to support jobs and the economy by keeping interest rates low on government bonds.

What the evidence shows

LSAP programmes have been conducted in the euro area, Japan, Sweden, the United Kingdom and United States.

The evidence shows LSAP proved effective in providing much needed support, lowering long-term interest rates and exchange rates, and underpinning economic growth and inflation.

Studies found the government bond purchases worth 10 percent of GDP have, on average, lowered 10-year government bond yields by around 50 basis points.

We expect LSAP will also lower long-term interest rates and the exchange rate in New Zealand.

Proposed weekly schedule for LSAP

• Latest LSAP - Indicative schedule (PDF 521KB)

Bond purchases results

Bond purchase results can be found on the Open market operations - D3 table

Decisions and announcements

Expanded Large-scale asset purchases - 12 August 2020

The Monetary Policy Committee agreed to significantly expand the LSAP programme potential to $100bn, up from the previous $60bn limit.

Our Large-scale asset purchases programme will buy up to $100bn of NZ Government Bonds, Local Government Funding Agency (LGFA) Bonds and NZ Government Inflation-Indexed Bonds in the secondary market by June 2022.

Supporting documents:

• Media release and Record of Meeting
• Letter from the Reserve Bank to the Minister of Finance – 6 August 2020 (PDF 79KB)
• Letter of Indemnity from Minister of Finance – 9 August 2020 (PDF 324KB)
• Response letter from the Minister of Finance – August 2020
• Memorandum of Understanding between the Minister of Finance and RBNZ regarding the use of alternative monetary policy tools (PDF 883KB)

Expanded Large-scale asset purchases - 13 May 2020

The Monetary Policy Committee has agreed to significantly expand the Large-scale asset purchase (LSAP) programme potential to $60 billion, up from the previous $33 billion limit. The LSAP programme includes NZ Government Bonds, Local Government Funding Agency Bonds and, now, NZ Government Inflation-Indexed Bonds.

More information:

• Media release and Record of Meeting
• Letter from the Reserve Bank to the Minister of Finance – 30 April 2020 (PDF 79KB)
• Letter of Indemnity from Minister of Finance – 10 May 2020 (PDF 324KB)
• Memorandum of Understanding between the Minister of Finance and RBNZ regarding the use of alternative monetary policy tools (PDF 883KB)

Expanded Large-scale asset purchases - 7 April 2020

We have added $3 billion of Local Government Funding Agency (LGFA) debt to our Large-scale asset purchase programme (LSAP). This represents approximately 30 percent of the total LGFA debt on issue, and takes the total size of the LSAP to $33 billion over 12 months.

More information:

• Media release and Record of Meeting
• Letter from the Reserve Bank to the Minister of Finance (PDF 76KB)
• Letter of Indemnity from Minister of Finance (PDF 706KB)
• Memorandum of Understanding between the Minister of Finance and RBNZ regarding the use of alternative monetary policy tools (PDF 883KB)

More information:

Read about our monetary tools to support the economy

More details about the bond programme process (23 March 2020)

Principles governing our monetary policy tools

RBNZ Bulletin: Aspects of implementing unconventional monetary policy in New Zealand May 2018