Daily Morning Operations
Open market operations are conducted almost every business day between 9.30 am and 10.00 am. (On rare occasions, the Reserve Bank may decide not to conduct open market operations if it judges that the system has the appropriate amount of liquidity.) The following outlines the key elements and timing of the operations.
Announcement of Open Market Operations
The Bank releases the key parameters for its daily open market operations at 9.30 am each day. This information is published on the Reserve Bank’s pages on the electronic news services (Reuters – RBA31; Bloomberg – RBAO8). The release notes:
- The previous day’s aggregate end-of-day Exchange Settlement (ES) balances.
- The Bank’s estimate of the ‘cash position’ (the net flow of liquidity between the Bank and the rest of the banking system) for the day. The term ‘deficit’ refers to a net outflow from the system to the Bank while the term ‘surplus’ refers to a net inflow to the system from the Bank.
- Whether the Bank is looking to buy securities (inject liquidity), sell securities (withdraw liquidity) or is not proposing to deal at all.
- The terms for which the Bank prefers to undertake repurchase agreements. On most days, the Bank nominates two or three such terms, usually between overnight and around 30 days.
Deadline for Approaches (Bids/Offers)
- Approaches by eligible counterparties must be made to the Domestic Markets Desk between 9.30 am and 9.45 am by telephone on +61 2 9551 8321 or by direct line. All lines are recorded.
- In general, a bid or offer submitted to the Bank may not be modified or withdrawn after 9.45 am. It may be modified or withdrawn prior to 9.45 am.
Structure of Approaches for Repurchase Agreements
- In general, approaches should be made on a cash value basis, unless otherwise agreed with the Bank.
- The minimum size for bids for cash or offers of cash under repurchase agreement is $20 million. Smaller amounts will be considered at the Bank’s discretion.
- Participants bidding for cash under repurchase agreement do not need to nominate the specific maturities of the securities they will provide to the Bank at the time of the approach. However, participants do need to specify at the time of the approach the class of securities that will be offered in the repurchase agreement. (‘General Collateral’ or ‘Private Securities’; see Eligible Securities for the different classes of securities). Securities provided under a single repurchase agreement must be entirely of one class or another.
- There is no limit on the size or number of bids or offers that each participant can make. A participant making multiple bids/offers can set an aggregate limit.
- Bids and offers for repurchase agreements should be quoted on an actual/365 day basis, using a simple interest calculation, payable at maturity. Quotes should be expressed to two decimal places.
- When making bids and offers for repurchase agreements the desired term in days must also be nominated. Participants may nominate terms other than the Bank’s preferred terms and may nominate a range of terms.
- Participants offering cash under repurchase agreement to the Bank should do so on the basis that the securities provided by the Bank will be domestic government securities with remaining maturities of greater than 12 months. The Bank does not provide prior indications to participants of what lines of stock it will be providing under repurchase agreement and will not accept requests for specific securities.
Structure of Approaches for Outright Transactions
- Securities being offered to, or bid for, by eligible counterparties must be CGS (Treasury Bonds, Treasury Indexed Bonds and Treasury Notes) and issues by Australian State and Territory borrowing authorities and must have remaining terms to maturity of around 18 months or less.
- The minimum size of outright bids for and offers is $10 million. Smaller amounts will be considered at the Bank’s discretion.
- Bid and offers for government securities should be expressed as a yield to maturity and stated to two decimal places.
Allocation
- For a given term, the Bank selects the best bid/offer. When considering purchases under repo, the Bank will also take into account the type of securities to be provided.
- Subject to liquidity management constraints, allocations across terms are made on the basis of the relative value of bids/offers, within and across each class of repurchase agreement, compared to prevailing market rates for comparable terms.
- Approaches may be partially filled. Multiple successful approaches at a given term and rate within each class of repurchase agreement are filled on a pro-rata basis if the total of the approaches exceeds the amount the Bank wishes to deal at that term.
- For calculating pro-rata shares, an approach exceeding the total amount of the day’s estimated system cash position will be regarded as equal to the estimated position.
- Pro-rata allocations are based on the amounts available to be dealt after aggregate limits imposed by the participants (if any) are taken into account.
- In the normal course, a minimum allocation of $20 million will apply.
- The Bank does not apply any counterparty limits in the allocation process.
Notification
- The Bank notifies both successful and unsuccessful participants by telephone.
- The Bank endeavours to provide this notification by 10.15 am but does not guarantee to do so.
- Details of successful approaches will be confirmed by a Bank dealer as part of notification and confirmed by the counterparty at that time.
- Details of aggregate results are published over the Bank’s pages on the electronic news services after participants have been notified of results (Reuters – RBA32–RBA34; Bloomberg – RBAO8) at around 10.15 am. These include the value, weighted average and cut-off rates of repurchase agreements dealt, by terms, as well as the value of any outright transactions and same-day value foreign exchange swaps.
