Monetary policy operations – es balances and repo agreements — es balances and repo agreements [A3-1]

A3 OPEN MARKET OPERATIONS – ES BALANCES AND REPO AGREEMENTS

A3 Reserve Bank of Australia – Open Market Operations

ES Balances and Repo Agreements

‘Total ES Balances’ is the aggregate of balances held in Exchange Settlement (ES) Accounts with the Reserve Bank rounded to the closest million, as at the close of business. 'Surplus ES balances' is the aggregate of balances held in ES Accounts (ESAs) adjusted for: the minimum amount of ES balances that ESA holders are required to hold; and net receipts from transactions settled via the direct entry (DE) system or the New Payments Platform (NPP) after 4:45 PM AEST/AEDT time on business days and all NPP payments on weekend and public holidays ('late payments'). An ESA holder’s applicable minimum ES balance requirement is the greater of: the amount of ES balances required to meet their after-hours payments activity; or their position in Standing Facility (SF) Repos contracted at a pricing rate equal to the rate on surplus ESA balances ('SF Repos at the Rate on Surplus ESA Balances').

SF Repos at the Rate on Surplus ESA Balances' is the aggregate of outstanding repurchase agreements contracted by ES account holders through the Reserve Bank’s standing facilities, where the pricing rate has been set equal to the rate on surplus ESA balances. In an 'SF Repo’, an ES Account holder is a seller of securities and the Reserve Bank is the buyer. Consequently, from the Reserve Bank’s point of view, these transactions are reverse repos. This series is published with a three-calendar-month publication lag: the series is updated on the last business day of each calendar month to cover the period up until the last business day of the calendar month three months earlier.

In determining compensation on ES funds, the Reserve Bank adjusts closing balances for the late payments of the account holder and for the ESA holder’s applicable minimum ES balance requirement. If the adjusted balance is negative, then a 25 basis point margin will be applied to the shortfall. ‘Deficit against 'late payments' and 'applicable minimum ES balance requirement' charged at Margin' is the aggregate of any such shortfalls. This series is published with a three-calendar-month publication lag: the series is updated on the last business day of each calendar month to cover the period up until the last business day of the calendar month three months earlier.

The Reserve Bank may contract SF Repos at a pricing rate equal to the rate on surplus ESA balances or at a (higher) ‘Margin’ rate of interest. The aggregate outstanding amount of SF Repos contracted at a rate above the cash rate target is shown as ‘SF Repos at Margin’. This series is published with a three-calendar-month publication lag: the series is updated on the last business day of each calendar month to cover the period up until the last business day of the calendar month three months earlier.

Separate to its standing facilities, the Reserve Bank may contract reverse repos through ‘Open Market Operations’. The outstanding amounts of both reverse repos and repos contracted through the Reserve Bank’s open market operations are shown. The values represent the initial purchase amounts plus accrued interest to that date.

‘Market value of securities held under Reverse Repo’ is derived from prices as at close of business on that day. These securities may be held under reverse repos contracted through the Reserve Bank’s standing facilities or its open market operations. ‘AGS’ is Australian Government Securities. ‘Semis’ are securities issued by State and Territory central borrowing authorities. ‘Other Government‑related’ are securities issued by approved supranational agencies, Foreign Governments or securities with an Australian or Foreign Government guarantee. ‘Asset-backed Securities’ Includes, but is not restricted to, asset-backed commercial paper (ABCP), residential mortgage-backed securities (RMBS), commercial mortgage-backed securities (CMBS) and securities backed by auto loans/leases and/or credit card receivables. ‘Other’ is any other security considered eligible by the Reserve Bank at the time. These series are published with a three-calendar-month publication lag: these series are updated on the last business day of each calendar month to cover the period up until the last business day of the calendar month three months earlier. If the last day of the calendar month falls on a weekend the series will be published on the first business day after the end of the month.

Regular Open Market Operations

‘Indicative Size of Operation’ is an indicative estimate of the size (in aggregate) of any transactions that the Reserve Bank may undertake, which would result in an injection/withdrawal of ES funds from the banking system. Withdrawal of funds is shown as a negative (-) figure. Injection of funds is shown as a positive (+) figure.

‘(Rev) Repo agreements’ is the aggregate purchase prices of securities bought by the Reserve Bank under repurchase agreement in its morning round of open market operations on that day. Where the Reserve Bank has sold a greater value of securities under repurchase agreement than it is has bought, the amount shown will be negative.

‘Outright transactions’ is the cash value of any outright purchases of securities contracted via the morning round of open market operations.

‘Foreign Exchange Swaps’ are the aggregate amount of Australian dollars sold against foreign currency (via swap) in the morning round of open market operations. Where the Reserve Bank has purchased a greater amount of Australian dollars under swap than it has sold, the amount shown will be negative.

‘Additional OMO Dealt’ are repurchase agreements contracted in any open market operations subsequent to the morning round of operations for that day. The amount shown represents the aggregate purchase prices of securities bought by the Reserve Bank. Where the Reserve Bank has sold a greater value of securities under repurchase agreement than it is has bought, the amount shown will be negative.

OMO Outright Transaction Detail

The 'Outright Transactions Details' provides further information on the outright purchases and sales of Bonds and Discount Securities issued by the Australian Commonwealth, State & Territory Governments, conducted as part of the Bank's regular open market liquidity operations. “Issuer” is the acronym of the issuer of the bond/security. A positive “Face value dealt” indicates a purchase while a negative value indicates a sale. 'Weighted average rate' is the average of the rates dealt for each bond/security, weighted by the amount transacted. 'Cut-off rate' is the lowest yield accepted.

OMO Repo Transaction Details

OMO Repo Transaction Details provides a summary of the type of securities delivered to/by the RBA under (Reverse) Repo at each term dealt through the Bank’s regular open market liquidity operations. 'Term' is the number of days dealt in the operations. 'Value Dealt' is the amount of the first leg of securities bought/sold by the RBA under (Reverse) Repo. Withdrawal of funds (Repo transactions) from the aggregate Exchange Settlement (ES) Account pool of funds is shown as a negative (-) figure. Injection (Reverse Repo) of funds into the aggregate ES Account pool of funds is shown as a positive (+) figure. ‘Weighted average rate' is the average of the rates on fixed-rate (Reverse) Repos dealt by the Bank through its regular open market liquidity operations, weighted by the amount transacted. ‘Cut-off rate' is the lowest of the rates on fixed-rate Reverse Repos (or highest of the rates on fixed-rate Repos) dealt by the Bank. ‘Weighted average spread’ is the average of the spreads to the cash rate target on floating-rate (Reverse) Repos dealt by the Bank through its regular open market liquidity operations, weighted by the amount transacted. ‘Cut-off spread' is the lowest of the spreads on floating-rate Reverse Repos (or highest of the spreads on floating-rate Repos) dealt by the Bank.

OMO Repo Unwinds

The Repos Unwinds sheet shows, for all repurchase agreements contracted via the Reserve Bank’s regular open market liquidity operations, the aggregate repurchase amounts corresponding to each business day. Where the Reserve Bank has contracted to repurchase a greater amount of securities than it has agreed to resell, a negative amount will be shown. For floating-rate (Reverse) Repos dealt by the Bank through its regular open market liquidity operations, the amounts are calculated assume no change to the cash rate target from the publication date.

Bond Purchase Program

The Bond Purchase Program is when the Bank purchases government securities under the bond purchase program set out in the Governor's Statements of 3 November 2020 and 2 February 2021. These transactions are executed on an outright basis not under repurchase agreement, and for standard settlement date of T+2. Data are updated daily for the previous day’s transactions. Note that auction results for 23 June 2021 were amended due to an erroneous approach.

Long-Dated Open Market Operations

The Long-Dated Open Market Operations is when the Bank purchases (or sells) eligible securities with terms to maturity greater than 18 months that do not form part of the bond purchase program. This includes purchases for the purpose of the 3-year yield target as announced on 19 March 2020 and bonds purchased to address market dislocations since March 2020 – see https://www.rba.gov.au/mkt-operations/announcements/rba-purchases-of-government-securities.html for more information. These transactions are executed on an outright basis not under repurchase agreement, and for standard settlement date of T+2. Data are updated daily for the previous day’s transactions.

Short-Dated Liquidity Management

The Short-Dated Liquidity Management Operations are when the Bank purchases Australian Government Securities with terms to maturity less than 18 months over-the-counter, for the purposes of managing the liquidity impact when these bonds mature. These transactions are executed on an outright basis not under repurchase agreement. Data exclude sales to the AOFM, which have no liquidity impact, and are published with a one week delay.

US Dollar Repo Operations

From March 2020, the RBA offerred to purchase Australian dollar-denominated securities under reverse repurchase agreement (repo) with the transaction settled in US dollars. All those members of the Reserve Bank Information and Transfer System (RITS) that were eligible to participate in the RBA's domestic market operations were also eligible to participate in the Bank's US dollar repo operations. Each operation was conducted as a variable rate auction, with bids for each repo maturity submitted as a US dollar interest rate. For each repo maturity, allocations were made in descending order of interest rate bid, subject to no single participant being allocated more than 25 per cent of the total amount of funds offerred under the particular operation. The purchase prices of securities sold to the RBA under these operations were calculated by adjusting their current market value (in US dollar terms) by a margin. For each security, the margin was set 10 percentage points higher than the margin applicable to that security in the RBA's domestic market operations.

Term Funding Facility

On 19 March 2020 the Reserve Bank announced the Term Funding Facility (TFF), designed to support lending to Australian businesses by offering three-year funding to authorised deposit-taking institutions (ADIs). On 1 September 2020 the Reserve Bank announced the introduction of the Supplementary Allowance. For details on the TFF, see the "Term Funding Facility" website in the "Market Operations" section of the Reserve Bank website. In the "Term Funding Facility" tab, "Total Drawdowns" is equal to the total value of outstanding TFF Repos. "Total Funding Allowance" is the sum of TFF Funding Allowances for all ADIs; from 6 April 2020 to 30 September 2020 it is equal to the sum of the “Initial Allowance” and “Additional Allowance” columns, from 1 October 2020 to 30 June 2021 it is equal to the sum of the "Initial Allowance Drawdowns", "Additional Allowance" and "Supplementary Allowance" columns (with use of Initial Allowance Drawdowns from 1 October reflecting that the Initial Allowance could not be drawn further after 30 September), from 1 July 2021 it is equal to the sum of final values of each of the "Initial Allowance", "Additional Allowance" and "Supplementary Allowance" columns, representing the total funding made available to eligible institutions over the period the TFF facility was open to draw-downs. The “Initial Allowance” is sum of TFF Initial Allowances for all ADIs. "Additional Allowance attributed to SME lending" and "Additional allowance attributed to large business lending" are the sum of TFF additional allowances for all ADIs for SME and large business lending respectively. The "Supplementary Allowance" is the sum of TFF Supplementary Allowances for all ADIs. The TFF closed to new drawdowns of funding on 30 June 2021. The “Total Drawdowns” series will continue to be updated weekly until all active TFF repos have matured. Other series in the “Term Funding Facility” tab were updated for the final time on 2 June 2021. For more information on how terms are defined see the TFF Operational Notes. For more information on usage of the TFF, see Reserve Bank Statement on Monetary Policy, August 2021, Box C: Use of the Reserve Bank's Term Funding Facility.

Term Funding Facility Unwinds

The TFF Unwinds sheet shows the sum of all TFF repos that have matured, or are scheduled to mature, in the week ending on the given business day since the first scheduled TFF maturity. Early terminations will change scheduled maturities and may not be reflected in A3 immediately.