Australian Government, the Australian Office of Financial Management

OPERATIONAL NOTICE

No: 14/2004

ESTABLISHMENT OF SECURITIES LENDING FACILITY FOR TREASURY BONDS

The Australian Office of Financial Management (AOFM) is establishing a lending facility for Australian Government Treasury Bonds. The facility will allow bond market participants to borrow bonds when they are not readily available from other sources in the market. It is intended to enhance the efficiency of the Treasury Bond market by improving the capacity of intermediaries to make two-way prices, particularly for bonds that become ‘tight’ in the repurchase market.

The facility will be operated by the Reserve Bank of Australia (RBA) on behalf of the AOFM and will operate through repurchase agreements between the RBA and market participants. It will have a lender of last resort character and its pricing will reflect this.

Counterparties borrowing Treasury Bonds through the facility will need to provide collateral in the form of other Commonwealth Government Securities i.e. Treasury Bonds, Treasury Indexed Bonds or Treasury Notes.

The decision to establish the facility follows consultation with the RBA and financial market participants. Stock lending facilities are operated by State Government borrowing authorities and many overseas sovereign borrowers.

A further notice will be released to provide detailed procedures when the facility is in place.

Contact for enquiries:
Gerald Dodgson
Head of Treasury Services
Telephone: 02 6263 1141

 

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