Last week the Reserve Bank lent another NZ$1.5 billion for terms of up to a year to New Zealand's banks through its new Term Auction Facility that accepts Residential Mortgage Backed Securities (RMBS) as collateral for reverse repos. This brings the total lent in the first two weeks to NZ$2 billion. Meanwhile in the associated Reserve Bank Bill facility attached to the TAF as a liquidity mopping up mechanism, the Reserve Bank has sucked back NZ$975 million worth of cash. This brings the total 'mopped up' to NZ$1.675 billion in the first two weeks. A quantitative easing perhaps? The facilities are designed to help the Australian-owned banks refinance short term foreign debts that can't be rolled over because of the global credit crunch, although some banks may be using it because it is much cheaper than rolling over on wholesale markets. The average weighted bid rate for the NZ$920 million of 1 year reverse repos issued to the banks last week was 5.48%, while the NZ$580 million of six month reverse repos was priced at 5.73%. More details are here. * This article was first published yesterday in our daily subscription newsletter for the banking and finance industries. The email costs NZ$365 per annum and carries exclusive news and analysis for New Zealand banking and finance industry executives, regulators and investors. Sign up for a free trial here.
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