Christopher Kent is Assistant Governor (Financial Markets) at the Reserve Bank of Australia.
- he is speaking on: “The RBA’s Monetary Policy Implementation System – Some Important Updates”
- at the KangaNews Debt Capital Market Summit, Sydney
Outlines some changes to repo rates, but assures us that the changes have no implications for the stance of the bank’s monetary policy
Kent:
- To increase the price of all new Omo Repos by 5 basis points to 10 basis points over the cash rate target
- To introduce a seven-day term, in addition to the existing 28-day term, at each weekly Omo effective from April 9
- Changes have no implications for the stance of monetary policy
RBA’s Kent
An OMO repurchase agreement (repo) is a short-term contract between the RBA and a financial institution. In this contract:
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The RBA buys government securities (or accepts them as collateral) from a bank today.
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The bank agrees to buy them back later—typically the next day or within a few days—at a slightly higher price.
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The difference between the sale and repurchase prices implies an interest rate.
This injects temporary liquidity into the system (the bank gets cash), and the RBA later withdraws it when the repo matures.
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