Long-dated Liquidity Operations
The Reserve Bank's main liquidity management operations are conducted each morning at 9.30 am. These involve repurchase agreements and outright transactions in short-dated bonds (bonds with less than around 18 months remaining to maturity). The Reserve Bank announced in March 2004 that these operations would be supplemented by longer-dated liquidity operations. These involve purchases of longer-dated Treasury and State government bonds and are subject to the following arrangements:
Eligible Securities
The following securities are eligible in the Reserve Bank's Long-dated Liquidity Operations.
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Commonwealth Government Securities (CGS)
- Treasury Bonds with remaining maturities greater than around 18 months.
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Securities Issued by Australian State and Territory
Borrowing Authorities (Semis)
- Domestic fixed income bonds – specifically, those recognised as liquid, benchmark securities – with remaining maturities greater than around 18 months. Securities must be lodged in Austraclear at the time they are offered to the Reserve Bank.
For the present, the Reserve Bank does not purchase inflation-linked securities or securities with embedded options of any kind.
Eligible Counterparties
To be eligible to participate in the Reserve Bank’s long-dated liquidity operations, counterparties must be dealers within Yieldbroker DEBTS, members of RITS, subject to an appropriate level of regulation, and able to ensure efficient and timely settlement of transactions with membership of the Austraclear system.
Membership of RITS currently requires counterparties to be incorporated or registered in and carrying on business in the Commonwealth of Australia.
An appropriate level of regulation is as determined by the Reserve Bank. In general, the Bank will require the counterparty to be:
- an Authorised Deposit-Taking Institution (ADI), regulated by APRA; or
- the holder of an Australian financial services licence and regulated by ASIC; or
- subject to an exemption from the requirement to hold an Australian financial services licence, as determined by ASIC and subject to any conditions specified by ASIC in that exemption; or
- where established under State or Territory legislation, subject to adequate controls as deemed appropriate by the Reserve Bank.
Any difficulties encountered by the Reserve Bank in settling transactions with a counterparty may lead to that counterparty’s eligibility status being revoked.
Timing
Transactions normally take place around once a month.
Announcements
The Reserve Bank announces its intention to conduct a Long-dated Liquidity Operation via Yieldbroker DEBTS and the electronic news services (Reuters – RBA34; Bloomberg – RBAO6) normally around 2.30 pm on the day of the operation. The announcement indicates:
- the types of securities the Reserve Bank will buy (i.e. CGS, Semis, or both);
- the broad range of maturities;
- the time within which approaches are to be submitted; and
- the settlement date.
The announcement also shows the maximum face value of securities the Reserve Bank expects to purchase in the operation (though it does not guarantee to purchase this maximum).
Approaches
Approaches are made over Yieldbroker DEBTS. Dealers who encounter difficulties in submitting their approaches over that system should contact the Domestic Markets Desk by telephone (on +61 2 9551 8321 or direct line). All calls are recorded.
Offers cannot be submitted, changed or withdrawn after the cut-off time for submissions has passed.
Approaches should be made on a face value basis.
There is no limit on the number of approaches that a participant can make.
Allocation
Allocation of the operation is made on a relative value basis, subject to the Reserve Bank's portfolio considerations.
Approaches may be partially filled. Multiple successful approaches for a given security or for several securities with maturities that are similar, but not necessarily identical, are filled on a pro-rata basis.
An approach exceeding the maximum amount indicated by the Reserve Bank for the Long-dated Liquidity Operation is regarded as equal to the maximum amount for calculating pro-rata allocations.
Approaches that are partially filled are rounded up to the nearest million.
Notification
All participants will be notified of the success or otherwise of their approach via Yieldbroker DEBTS.
Aggregated results are published on electronic news services (Reuters – RBA35; Bloomberg – RBAO7) shortly after the operation. These include the face value and the weighted average and cut-off yields for each security purchased.
Settlement
Securities purchased by the Reserve Bank through this operation are generally settled on a T+3 basis.
Unless another pricing formula has been specified by the issuer of the security, the CGS pricing formula will be used to determine the consideration of transactions in both CGS and semi-government securities.
Settlement of all securities must be processed through the Austraclear system. The Austraclear System Day Session is open between 9.15 am and 4.30 pm. Settlement should be completed by the close of the Day Session. Requests for session extensions should be made directly to Austraclear via the Austraclear Help Desk (1300 362 257).
If at any stage a counterparty believes that it will fail to deliver securities to the Reserve Bank, it should immediately contact the Domestic Markets Desk (+61 2 9551 8321).
