Open market operations (D3)

Background notes

The data: coverage, periodicity and timeliness

Coverage characteristics

Data volumes are shown in millions of New Zealand dollars and interest rates are New Zealand interest rates.

The following data is recorded and detailed further in the series description:

• date held
• transaction type
• maturity date
• eligible securities
• total volume offered
• volume offered per maturity
• volume bid
• total amount transacted
• range of bids received
• range of successful bids
• weighted average successful bids
• settlement date
• total number of bids submitted
• total number of successful bids
• government bond
• Local Government Funding Agency bond
• total holdings.

The Open Market Operation (OMO) is used to manage the level of liquidity in New Zealand’s financial system. These operations are announced daily via electronic media. The announcement indicates whether we will inject or withdraw funds (using reverse repurchase transactions or repurchase transactions). Operations are conducted as tenders and registered bidders telephone their bids to us.

In March 2020, we introduced a number of new facilities, which include the Large Scale Asset Purchase programme (LSAP), Corporate Open Market Operation (COMO) and reintroduced the Term Auction Facility (TAF). The LSAP is held on Monday, Wednesday, Thursday and Friday. The COMO and TAF run each Tuesday in the domestic market operations.

Before 11 December 2007, eligible securities were limited to government bonds, Treasury bills and Reserve Bank bills (RBB). We stopped issuing RBB in 1999, but reintroduced them in November 2008 (see below).

Beginning on 11 December 2007, we have accepted Kauri bonds for use in our domestic market operations. We expanded the range of acceptable securities in June 2008.

Refer to Eligible securities and haircuts for a full list of eligible securities.

Beginning in November 2008, in conjunction with the reintroduction of RBB, we introduced a Term Auction Facility (TAF). RBB tenders are held weekly on Monday and Wednesday afternoons, as required, and are used to withdraw liquidity from the banking system. The TAF operates in a similar manner to the OMO and is used to inject liquidity into the banking system. The TAF was discontinued in November 2009.

Historical data is available beginning 1 November 1995.

Periodicity

Daily.

Timeliness

We publish the results of the OMOs on the day they are held. We release RBB tender results the day after the tender. We also release results via electronic media.

Access by the public

Statistics release calendar

The statistics release calendar provides a long-term plan of scheduled releases. We update and release it on the first working day of the month.

View the statistics release calendar

Integrity

Dissemination of terms and conditions under which official statistics are produced, including confidentiality of individual responses

Although there is no law that requires us to compile and publish historical data on OMOs, we disseminate the data as a service to the public.

Provision of information about revisions and advance notice of major changes in methodology

The data are final and are not subject to revision. Any changes to the processes of conducting the OMOs are announced via electronic media.

Read the procedures in Section 3 of the Operating Rules and Guidelines for the Domestic Markets

Quality

Dissemination of documentation on methodology and sources used in preparing statistics

For additional explanatory information, see the following Bulletin article.

Liquidity and the New Zealand financial system

Dissemination of statistics that support statistical cross-checks and provide assurance of reasonableness

Not applicable.

Additional notes

In October 1994, we introduced repurchase agreements into our open market operations. On 9 October 1995, we stopped using secured loans in our open market operations.

Electronic media

Includes Refinitiv and Bloomberg.

Security types

Most securities reported are wholesale market instruments: New Zealand government bonds, Local Government Funding Agency bonds, Treasury bills, corporate bonds, Reserve Bank bills, commercial paper and registered certificates of deposit (RCDs).

Interest bearing securities

These are written agreements, whether marketable or not, in which one party promises to pay a stated sum on demand, or on a specified date, to the legal holder of the document. They may also involve a promise to pay stated interest at specified intervals over the term of the bond. Alternatively, they may be issued and traded at discount from their nominal value.

These include: government bonds, Treasury bills, Reserve Bank bills, bills of exchange, commercial paper (including eurocommercial paper), certificates of deposit, debentures, convertible notes, and medium term notes issued by private placement.

Types of government securities currently on issue are:

Government bonds are denominated in New Zealand dollars, issued for terms greater than one year, and have a fixed interest coupon paid semi-annually in arrears.

Inflation-indexed bonds (IIB) are denominated in New Zealand dollars with a fixed coupon paid quarterly in arrears. On maturity, the principal and the indexed component of the bonds are redeemable. The index component refers to the incremental CPI adjustment.

Treasury bills are denominated in New Zealand dollars, sold at a discount to the nominal value and carry no coupon. The bills are redeemable at par on maturity. Treasury bill tenders are generally held by NZDMO on a weekly basis. Three maturities of regular Treasury bills are offered in each tender with roughly 3, 6 and 12-month maturities.

Other types of securities currently on issue are:

Reserve Bank bills

Reserve Bank bills are denominated in New Zealand dollars, sold at a discount to par and carry no coupon. The bills can be discounted back to us when they are within 28 days of maturity. The bills are redeemable at par on maturity. We stopped issuing bills in February 1999, but reintroduced these in November 2008.

Commercial paper

Refers to private sector (including financial corporations), short-term (usually less than one year) discounted debt instruments.

Corporate bonds

Refers to New Zealand dollar denominated debt instruments, recorded on a New Zealand register, that are issued by private sector entities (including financial corporations). Issuers can be both New Zealand residents (domestic) and non-residents (Kauris).

Domestic corporate bonds

Refers to issues of New Zealand dollar denominated debt recorded on a New Zealand register by New Zealand incorporated entities.

Non-domestic corporate bonds

Refers to issues of New Zealand dollar denominated debt issued by a non-resident incorporated entity and recorded on a New Zealand register. Such issues are sometimes referred to as Kauri bonds.

Registered certificates of deposits (RCDs)

Refers to issues of discounted, short-term (less than one year) debt securities, the majority of which are issued by banks. RCDs have largely taken the place of individual bank bills.

Repurchases and reverse repurchases

Arrangements under which one party sells a security at a specified price to another party with an agreement that the security will be repurchased at a fixed price on a specified future date. The party that sells the security upon entering the arrangement is said to be ‘repurchasing’ the security. The party that buys the security upon entering the arrangement is said to be ‘reverse repurchasing’ the security.

Asset-backed securities

Refers to issues of New Zealand dollar denominated assets that may include but are not restricted to receivables (invoices, credit cards), commercial mortgage backed securities, hire-purchase agreements and equipment purchases.

Descriptions of tenders

Open market operations

The Open Market Operation (OMO) is used to manage the level of liquidity in New Zealand’s financial system. We announce these operations daily via electronic media. The announcement indicates whether we will inject or withdraw funds (using reverse repurchase transactions or repurchase transactions). We conduct operations as tenders, and registered bidders telephone their bids to us.

Prior to 11 December 2007, eligible securities were limited to government bonds, Treasury bills and Reserve Bank bills (RBB). (See Description for definition of terms.) We discontinued issuing RBB in 1999, but reintroduced them in November 2008.

Beginning on 11 December 2007, we have accepted Kauri bonds for use in our domestic market operations. We further expanded the range of acceptable securities in June 2008. Refer to the Eligible securities and haircuts page for a full list of eligible securities.

Term Auction facility

Beginning in November 2008, in conjunction with the reintroduction of RBB, we introduced a Term Auction Facility (TAF). The TAF operates in a similar manner to the OMO and is used to inject liquidity into the banking system. The TAF was discontinued in November 2009 and reintroduced in March 2020. TAF auctions are held weekly on a Tuesday morning at 9:30am and are used to inject liquidity into the banking system.

Reserve Bank bill tender

We issue short-term discount securities. We ceased issuing RBB on 5 February 1999. All RBB and related advances to the Treasury were repaid by 9 April 1999. Reserve Bank bills were reintroduced in November 2008 to assist in managing the liquidity of the banking system. RBB tenders are held weekly, on Monday and Wednesday afternoons, to withdraw liquidity from the banking system.

Large Scale Asset Purchase programme

In March 2020, we introduced the Large Scale Asset Purchase programme to inject money into the banking system with the aim of lowering borrowing costs to households and businesses through buying NZ government bonds, Local Government Funding Agency bonds and NZ government inflation-indexed bonds in the secondary market. The LSAP is held every Monday, Wednesday, Thursday and Friday at 11am.

Corporate Open Market Operation

In March 2020, we introduced the Corporate Open Market Operation to support market functioning. The COMO is held weekly on a Tuesday morning at 11am where just corporate and asset-backed eligible securities will be acceptable as collateral on a two-name basis.

Tender related terminology

Total volume / amount offered

The total nominal amount being offered in the tender.

Volume offered per maturity

More than one maturity date can be offered in an operation. We will set a volume limit for each maturity offered. We may accept bids for one or all of the maturity dates, but the total amount we accept will normally not be more than the total volume offered.

Volume bid / Total bids submitted

The total amount bid for the particular maturity date by all bidders.

Total amount transacted / Total successful bids

The total amount we accept for the particular maturity date.

Range of bids received

The range of bids we receive, including successful and unsuccessful bids.

Range of successful bids

The range of successful bids, from the minimum to the maximum rate.

Weighted average successful bids

Weighted average interest rates, weighted by volume per rate.

Date held

Refers to the date when we held the tender. This is not the settlement date where cash is exchanged for the security, except for our Open Market Operations where settlement occurs on the day of the tender.

Range of yields on unsuccessful bids

The range of unsuccessful bids, from the lowest rate we accept to the highest bid we receive. The lowest rate of the unsuccessful bids can be the same as the highest rate of the successful bids if successful bids have been pro-rated at the highest successful rate.

Weighted average yield of unsuccessful bids

Weighted average interest rates, weighted by volume per rate.

Symbols and conventions for summary table

General notes

• Individual figures may not sum to the totals due to rounding
• Percentage changes are calculated on unrounded numbers
• You are free to copy, distribute and adapt these statistics subject to the conditions listed on our copyright page.