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ELIGIBLE SECURITIES
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Outright Transactions
The Reserve Bank of Australia (RBA) will enter into outright transactions in the following securities at its daily open market operations.
Commonwealth Government Securities
- Treasury Notes
- Treasury Bonds with remaining maturities of less than 18 months
- Treasury Indexed Bonds with remaining maturities of less than 18 months
Securities issued by State Government and Territory Central Borrowing Authorities (Semi-governments)
- Semi-government Promissory Notes
- Semi-government Bonds with remaining maturities of less than 18 months
- Semi-government Indexed Bonds with remaining maturities of less than 18 months
RBA Media Release No. 2004-03, 4 March 2004
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Repurchase Agreements
The RBA will enter into repurchase agreements (repos) in its daily open market operations. It also operates an intra-day and overnight repurchase agreement facility.
At present, the RBA accepts two broad classes of securities under repo. These are: Government and Quasi-Government securities (also referred to here as General Collateral), and private securities. Detail on the securities within both classes and the conditions under which they are accepted by the RBA are set out below.
General Collateral
This class comprises four types of securities.
- Commonwealth Government Securities
Specifically:- Treasury Notes
- Treasury Bonds
- Treasury Indexed Bonds
- Securities issued by State Government and Territory Central Borrowing
Authorities
Specifically:- Semi-government Promissory Notes
- Semi-government Bonds
- Semi-government Indexed Bonds
- A$ offshore issues lodged in the Austraclear System as Euro-entitlements
RBA Media Release No. 2001-12, 7 June 2001
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A$ Domestic Issues by Supranationals and Foreign Governments
Certain A$ domestic-issued securities of supranational institutions and foreign sovereigns will be accepted by the RBA where the securities meet certain criteria. These securities will be eligible where:
- The security is denominated in Australian dollars and is lodged and active in Austraclear.
- All securities must be settled in the Austraclear System.
- The security is rated AAA (or, in the case of securities issued by the New Zealand government, at least AA+) by all major credit rating agencies that rate it, and, in any event, by at least two major credit rating agencies.
- The issuer or foreign government is rated AAA (or, in the case of securities issued or guaranteed by the New Zealand government, at least AA+) by all major credit rating agencies that rate it, and, in any event, by at least two major credit rating agencies.
Structured securities, including indexed-linked securities or those with embedded derivatives or variable rates, will not be accepted.
List of eligible supranational and foreign government securities - XLS 31K
Requests can be made to add a security to the list. See Applying for Eligible Security Status for details.Securities that are currently listed as eligible will lose their eligibility status if they fail to meet the RBA requirements in the future. In these circumstances, counterparties with outstanding repurchase agreements with the RBA will be required to substitute eligible stock as replacement for those securities that have lost their eligibility status. The Domestic Markets Desk will contact those counterparties affected by a change in security eligibility and arrange for substitution.
For additional details refer to the following media releases on the RBA website:
RBA Media Release No. 2004-03, 4 March 2004
- A$ Securities with a Sovereign Government Guarantee
These securities will be eligible where:
- The security is denominated in Australian dollars and is lodged and active in Austraclear.
- All securities must be settled in the Austraclear system. The RBA will not accept securities that trade as Euro-entitlements.
- Institutions participating in the RBA's open market operations may not present securities issued by itself or a related entity.
- The security has an explicit guarantee (or something deemed by the RBA to be equivalent support) from the Australian Government or a sovereign government that is rated AAA (or, in the case of securities guaranteed by the New Zealand government, at least AA+) by all major credit rating agencies that rate it, and, in any event, by at least two major credit rating agencies.
- For securities guaranteed by a foreign sovereign government, the security is rated AAA (or, in the case of securities issued or guaranteed by the New Zealand government, at least AA+) by all major credit rating agencies that rate it, and, in any event, by at least two major credit rating agencies.
The Bank will accept these securities as general collateral for as long as they carry a guarantee. Both short-term securities (such as bills and CDs) as well as long-term securities are eligible.
List of eligible long-term sovereign government guaranteed securities - XLS 34K
Private Securities
Short-term Securities
Three types of short-term securities will be accepted by the RBA under repo:
- Bills and Certificates of Deposit
In addition to accepting all securities issued by ADIs under the Australian Government Guarantee Scheme as ‘general collateral’, the RBA will accept as ‘private securities’ other bank accepted bills of exchange and negotiable certificates of deposit (CDs) issued domestically by any authorised deposit-taking institution which holds an Exchange Settlement (ES) account at the RBA, where the remaining term to maturity of these securities is no more than 12 months. All securities must be lodged in the Austraclear System and all transactions must be settled in the Austraclear System. Institutions participating in the RBA's open market operations may not present securities issued by itself or a related entity.
List of institutions whose bills and CDs are currently eligible - XLS 23K
For additional details refer to the following media release on the RBA website:
RBA Media Release No. 2004-03, 4 March 2004 - Commercial Paper
The RBA will accept under repo Australian-dollar denominated commercial paper issued domestically. The following conditions apply:
- The paper is rated P-1 or its equivalent by all major credit rating agencies that rate it.
- All securities must be lodged and must settle in the Austraclear System. The RBA will not accept securities that trade as Euro-entitlements.
List of currently eligible CP - XLS 30K
The RBA will not accept a security under repo unless it is on the list of eligible securities. Requests can be made to add a security to the list. See Applying for Eligible Security Status for details.
For additional details refer to the following media release on the RBA website:
- Asset-backed commercial paper (ABCP)
The RBA will accept under repo Australian-dollar denominated ABCP issued domestically. The following conditions apply:
- The paper is rated P-1 or its equivalent by all major credit rating agencies that rate it.
- All securities must be lodged and must settle in the Austraclear System. The RBA will not accept securities that trade as Euro-entitlements.
List of currently eligible ABCP - XLS 31K
The RBA will not accept a security under repo unless it is on the list of eligible securities. Requests can be made to add a security to the list. See Applying for Eligible Security Status for details.
For additional details refer to the following media release on the RBA website:
RBA Media Release No. 2008-26, 6 November 2008
The RBA must be provided, on an ongoing basis, with details on the composition of the mortgages underlying the security – including the share of prime domestic full-doc and low-doc residential mortgages insurable by an acceptable mortgage insurer. This information should be provided in the Mortgage Collateral Pool Reporting form (XLS 28K), which must be e-mailed to eligible_securities@rba.gov.au in a timely manner.
Where the RBA cannot identify a timely market price for short-term securities, the security will be valued at the bank bill swap rate (BBSW) plus 100 basis points until a market price can be identified from a recognised and independent source.
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Long-term securities
Three types of long-term securities will be accepted by the RBA under repo:
- ADI-Issued Debt Securities
In addition to accepting all securities issued by ADIs under the Australian Government Guarantee Scheme as ‘general collateral’, the RBA will accept as ‘private securities’ certain other Australian-dollar denominated debt securities issued domestically by an authorised deposit-taking institution which holds an ES account at the RBA. The following conditions apply.
- The issuer or security is rated A3 or higher by all major credit rating agencies that rate it and, in any event, by at least two such agencies.
- The securities are not subordinated.
- The securities are not structured. The RBA will not accept securities with special features, such as indexed-linked securities, embedded derivatives and variable rate interest margins. The RBA will accept floating rate notes.
- All securities must be lodged and must settle in the Austraclear System. The RBA will not accept securities that trade as Euro-entitlements.
- Institutions participating in the RBA's open market operations may not present securities issued by itself or a related entity.
List of currently eligible ADI-issued debt securities - XLS 30K
The RBA will not accept a security under repo unless it is on the list of eligible ADI-Issued debt securities. Requests can be made to add a security to the list. See Applying for Eligible Security Status for details.
For additional details refer to the following media release on the RBA website:
RBA Media Release No. 2007-14, 6 September 2007
- Asset-backed securities
The RBA will accept under repo Australian-dollar denominated asset-backed securities (including, but not restricted to, residential mortgage-backed securities (RMBS), commercial mortgage-backed securities (CMBS) and securities backed by auto loans/leases, credit card receivables) issued domestically. The RBA will not accept collateralised debt obligations (CDOs) backed by other asset-backed securities. The following conditions apply:
- The securities must have a public rating of AAA or equivalent from all of the major credit ratings agencies that rate it.
- The securities must be tradeable in the secondary market, must make regular coupon payments and must be based on a true sale of assets into a bankruptcy remote Special Purpose Vehicle (SPV).
- All securities must be lodged and must settle in the Austraclear system. The RBA will not accept securities that trade as Euro-entitlements.
Private placement securities are eligible so long as they meet all criteria.
List of currently eligible asset-backed securities - XLS 79K
The RBA will not accept a security under repo unless it is on the list of eligible securities. All conditions must be met before a security can be added to the list of eligible securities. Requests can be made to add a security to the list. See Applying for Eligible Security Status for details.
For additional details refer to the following media release on the RBA website:
RBA Media Release No. 2008-26, 6 November 2008
The RBA must be provided, on an ongoing basis, with details on the composition of the assets underlying the security, in particular:
- the share of prime domestic full-doc residential mortgages;
- the share of prime domestic low-doc residential mortgages; and
- a list of mortgage insurers represented in the pool and the share of mortgages that each covers.
These details must be provided before the security can be deemed eligible, and updated ahead of coupon payment dates or if there is a material change in circumstances. This information should be provided in the Mortgage Collateral Pool Reporting form (XLS 28K), which must be e-mailed to eligible_securities@rba.gov.au in a timely manner. This information must be able to be verified from a public source.
- Other AAA-rated debt securities
The RBA will other accept under repo Australia-dollar denominated securities issued domestically. The following conditions apply:
- The securities must have a public rating of AAA or equivalent from all of the major credit ratings agencies that rate it.
- All securities must be lodged and must settle in the Austraclear system. The RBA will not accept securities that trade as Euro-entitlements.
- The securities must not be highly structured, index-linked or incorporate other features such as embedded derivatives or variable interest rates.
List of currently eligible other AAA-rated debt securities - XLS 26K
The RBA will not accept a security under repo unless it is on the list of eligible securities. All conditions must be met before a security can be added to the list of eligible securities. Requests can be made to add a security to the list. See Applying for Eligible Security Status for details.
For additional details refer to the following media release on the RBA website:
Where the RBA cannot identify a timely market price for long-term securities, the security will be valued at 90 per cent of par value until a market price can be identified from a recognised and independent source.
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Applying for Eligible Security Status
Applications to add a security to one of the lists of eligible securities must be made using the Application Form for Eligible Securities.
All of the required fields must be filled in and supporting documentation must be supplied, where indicated. It is up to the applicant to show that the security meets the RBA requirements.
For short-term debt securities, it is sufficient for the applicant to show that the program, rather than individual securities, meets the RBA requirements.
The completed Application Form and supporting material should be e-mailed to eligible_securities@rba.gov.au.
At least one working day should be allowed for applications to be assessed.Margins
Details on margins are outlined in The Reserve Bank of Australia's Open Market Operations.
Other Conditions
The following broad conditions apply to collateral accepted in repurchase agreements with the RBA.
- The RBA will accept substitutions of securities between asset classes, with the exception of General Collateral. For example, it will accept an eligible certificate of deposit as substitution for another eligible certificate of deposit, eligible ADI security, eligible ABCP or RMBS. The RBA will accept a CGS, semi, or other quasi-government maturity as a replacement on any private security repo. However, General Collateral can only be used to replace securities from the General Collateral class.
- Where the substitution includes a change in the asset class of collateral, the margin applying to that collateral will be adjusted accordingly.
- The RBA has discretion to change eligibility criteria and conditions for various asset classes at any time.
- In the normal course of events, institutions selling securities under repurchase agreements with the RBA may not present securities issued by themselves or related entities.
In order to provide ADIs with greater flexibility to manage their liquidity in the present market conditions, the Reserve Bank will accept RMBS and ABCP of a related party as collateral. Note, however, that the RBA will provide cash value only for ‘Valued Assets’ underlying these securities. Valued Assets comprise:
- Prime domestic full-doc residential mortgages insurable by an acceptable mortgage insurer; and
- similarly qualified low-doc residential mortgages up to a maximum equivalent to 10 per cent of the value of all underlying assets.
For example, in a $100 RMBS, comprising $85 of eligible full-doc mortgages and $15 of eligible low-doc mortgages, the Valued Assets would be $95 ($85 in full-doc mortgages plus $10 of the low-doc mortgages).
Mortgages in the pool underlying a RMBS or an ABCP that do not meet the requirements for Valued Assets will be fully discounted by the RBA.
