BOJ floats $6.5b repo to mop up excess liquidity


BOJ floats $6.5b repo to mop up excess liquidity

$12.9b worth of certificate of deposits go on offer on Wednesday

Observer business writer

Sunday, October 20, 2019

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The central bank went to the local capital market last Friday with a $6.5-billion repurchase (repo) agreement to mop up excess liquidity in the money market.

Bidding for the 14-day instrument was opened to all deposit-taking institutions (DTI), with a settlement date of Tuesday, October 22. The repo matures on November 5.

Pricing for the repo will be done on a competitive basis. Bids were accepted up to 10:00 am last Friday. The minimum bid size was $100 million for participation in the operation.

The central bank has determined a minimum interest rate for eligibility in the auction. In that regard, bids submitted below the minimum will be deemed ineligible for participation in the auction.

Each DTI may submit up to three competitive bids in the operation. The interest rate for bids should not exceed two decimal places. The bank will truncate the interest rate to be consistent with this requirement.

According to the central bank, “the allocation of bids will start at the highest interest rate to the lowest interest rate, until the auction amount is fully allotted or all bids are fully allocated. Successfully allotted bids will be settled at the interest rate of the bid”.

Institutions must submit the nominal value of securities to be used as collateral for the bid at the time of making the bid application. The bank reserves the right to reject any bid for any reason and without explanation, in whole or part, including in light of the other bids received.



In the meantime, the bank has announced the issue of a $12.9-billion, 30-day fixed rate certificate of deposit, which goes on offer this coming Wednesday.

The coupon rate is fixed at 1 per cent. This instrument will be allocated through a competitive price auction using JamClear-CSD®.

This instrument is available directly to primary dealers and commercial banks. Other investors may access this instrument through a primary dealer.

The settlement date is Friday, October 25, maturing on Friday November 22. There will be a non-competitive portion of $645 million.

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