Reuters reports that "the Reserve Bank of New Zealand (RBNZ) said on Monday that it was deploying more tools to provide additional liquidity to the corporate sector and support market functioning to offset the impact of the coronavirus."
Reuters explains that a new weekly "Open Market Operation (OMO) will provide liquidity in exchange for eligible corporate and asset-backed securities", quoting the RBNZ which explained this in a statement.
"The OMO will be held each Tuesday and will offer up to NZ$500 million ($300 million) for terms out to approximately three months, it said. The first operation will be held on March 31. The bank also said it will offer to purchase government bonds maturing on May 15, 2021, for liquidity management purposes. The offer opens on March 31," Reuters reported.
Key notes
- Reserve Bank of New Zealand says will provide liquidity in exchange for eligible corporate and asset-backed securities.
- Reserve Bank of New Zealand says objective is to encourage banks to continue to fund their corporate clients by purchasing their debt securities.
- RBNZ says to hold OMO each Tuesday, where corporate & asset-backed eligible securities will be acceptable as collateral on two name basis.
- RBNZ says reserve bank continues to monitor market developments very closely, and stands ready to act further.
- Says corporate OMO seen as temporary, to support market functioning.
- Says offering to purchase NZ govt bonds maturing 15 may 2021 for liquidity management purposes.
- Says OMO to be held at 11:00 am local time each Tuesday & to typically offer up to $500 mln dollars for terms out to about 3 months.
- Says first corporate OMO operation to be held on March 31.
- Says reserve bank will review operation in 12 months’ time or sooner if demand diminishes.
Market implications
The NZD is set to open lower according to the pre-open market dollar rates which have otherwise enjoyed a wave of buying since bottoming in the 18th March in the 0.5470s reaching as highs as 0.6068, Friday's high. With market's fixated on COVID-19, New Zealand has reported its first coronavirus-related death, a woman in her 70s on the west coast of South Island, which may not go down well for NZD bulls as New Zealand health officials confirm 63 new cases on Sunday.
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