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RESERVE BANK OF AUSTRALIA

US Dollar Term Repo Operations

Note that this facility is no longer operational. US Dollar Term Repos were offered between September 2008 and February 2010.

This note sets out the terms that apply to the Reserve Bank’s US dollar term repo operations. In these operations, the Bank provides US dollar liquidity to eligible counterparties for term against the provision by counterparties to the Bank of eligible Australian dollar securities as collateral.

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Eligible Counterparties

Any member of the Reserve Bank Information and Transfer System (RITS) is eligible to participate in the US dollar term repo operations, provided that entity:

  • has treasury operations in Australia;
  • is able to execute and settle both Australian dollar and US dollar transactions with the Bank in an efficient and timely manner; and
  • satisfies the Bank’s legal requirements set out below.

Timing of Operations

The Bank conducts operations subject to market conditions and demand for US dollar liquidity in this time zone.

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Structure of Operations

  • Each operation is conducted as a variable rate auction.
  • Announcement of each operation will be made, with one day’s notice, over the Reuters and Bloomberg electronic news services.
  • The Bank will offer a fixed amount of US dollars at each auction.
  • The Bank will determine the term of each operation at its discretion.
  • Settlement will take place on a T+1 basis.
  • Approaches must be made between 10.30 am and 10.45 am to the Domestic Markets Desk by telephone (+61 2 9551 8321 or direct line). All calls are recorded. Approaches may be modified or withdrawn prior to 10.45 am.
  • For each bid, participants must specify both the US dollar interest rate and the US dollar amount.
  • The number of decimal places in the bid rate is limited to 3.
  • A minimum bid rate is set for each operation. The minimum bid rate will be published at around 10.15 am on the day of each operation on Reuters and Bloomberg.
  • The minimum bid amount is US$5 million.
  • Each participant may submit multiple bids.
  • Funds are allocated in descending order of the rate bid. Bids accepted at the lowest rate may be filled on a pro-rata basis, rounded down to the nearest US$1 million.
  • The total amount of all successful bids by a single participant is limited to 25 per cent of the total amount offered.
  • Interest is calculated on an actual/360 day basis.
  • The Bank notifies both successful and unsuccessful participants by telephone. The Bank aims to provide this notification by 11.00 am. Successful participants must confirm transaction details by 4.30 pm on the day of the operation in a form acceptable to the Bank. Details of aggregate results are published on Reuters and Bloomberg after participants have been notified of results.
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Eligible Collateral

Eligible collateral for US dollar term repo operations are the same eligible securities specified for Domestic Markets Operations.

For the purposes of assessing bids at US dollar term operations, all securities are treated as one class of collateral.

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Collateral Valuation

Collateral is valued using the approach currently used for the Bank’s open market operations.

Sufficient collateral must be provided at the start to cover the US dollar value of the funds advanced by the Bank. The Bank uses the 10.00 am WM Reuters Australian fix to establish the Australian dollar equivalent value required.

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Initial Margin and Margin Maintenance

Collateral is subject to the same initial margins that apply in the Bank’s daily open market operations.

An additional initial margin of 10 percentage points is applied to all collateral to mitigate foreign exchange rate risk.

All collateral is subject to daily variation margining based on movements in prices on the securities and changes in the WM Reuters Australian fix.

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Delivery of Securities

Successful participants must deliver eligible securities free-of-payment through the Austraclear System on the value date by the close of the RITS Daily Settlement Session. Collateral must be delivered to the Bank prior to the Bank advancing US dollar funds to the counterparty.

In order to take account of the time zone differences between Australia and the United States, the Bank will deliver collateral securities back to the counterparty on the business day following the maturity of the repurchase agreement provided the counterparty has repaid the US dollars (including interest) on maturity date to the Reserve Bank’s account at the Federal Reserve Bank of New York.

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Counterparties that participate in Reserve Bank US dollar term repo operations are bound by the RITS Regulations and Conditions of Operation, including the TBMA/ISMA Global Master Repurchase Agreement (2000 Version) as amended for Australia by the RITS Regulations. Participation in these US dollar term repo operations constitutes acceptance of the above Regulations. Counterparties will not be eligible to participate in these operations if precluded by particular conditions on their RITS Membership.

Prospective counterparties must provide their US dollar SSIs to the Reserve Bank by SWIFT message no later than 4.30 pm on the day of the operation.

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