News Release
Y2K: Longer-term repos by the Bank of England
20 Spetember 1999
- As part of its Y2K planning, the Bank of England today announced that, from October 1999 until the early months of 2000, it will offer a facility in the sterling money markets for its counterparties to repo eligible securities to it for a longer term than in its daily open market operations. The repos will initially be offered for a maturity of three months.
- The facility will allow sterling market participants to plan their liquidity management on a longer-term basis through the period across the year end. It will also help to reduce the overall amount of money market refinancing falling due each day when this could otherwise be large both because of the seasonal pattern of government cash flows and because of the expected seasonal rise in the note issue.
- In a separate statement issued today on"Sterling market liquidity
over Y2K", the Bank of England has set out a full description
of the arrangements it has put in place to ensure adequate
sterling market liquidity over the Y2K period.
- Ian Plenderleith, the Bank's Executive Director for financial market operations, commented:
"The Bank is confident that the careful planning of operations undertaken by market participants, and the facilities the Bank has put in place to assist the market, should ensure that orderly market conditions are maintained over the Y2K period. Market participants are well advanced with planning orderly conduct of their business activities over the period. The structure of market rates is consistent with this view.
We will continue to monitor market developments closely, and we are ready to respond if undue strains arise. But we see no reason why there should be any material disturbance to the orderly functioning of markets over the Y2K period". - The longer-term repo facility will be available from Wednesday 13 October 1999 through until the early months of 2000 and will be operated once each week. Applications to utilise the facility will be invited on the Wednesday of each week and proceeds will be made available to successful applicants on the Thursday and Friday of the same week, with the amounts spread equally between the two days in order to smooth the impact on the daily pattern of money market shortages. Liquidity provided under the facility will be in the form of repo against the full range of collateral eligible for use in the Bank's normal daily open market operations, which provide two-week liquidity and will continue unchanged in parallel with the new longer-term repo facility.
- Ahead of each week's activation of the new facility, the Bank may set a maximum amount to be provided under the facility that week in order to avoid undue fluctuations in the daily profile of money market shortages. In the event that market demand exceeds the maximum, the Bank would endeavour to increase the amounts available under the facility in succeeding weeks in order to meet the market's needs in full over the period.
- Repos under the facility will initially be offered for three months' maturity, ie across the end of the year. After October, repos may also be offered for two months, and possibly also for one month; the precise pattern of maturities available will be determined in the light of experience with the use of the facility. The rate of interest charged on amounts taken under the facility will be the Bank's repo rate, but will vary so that, if the Bank's repo rate is changed during the life of a longer-term repo, interest from that point will be charged at the new repo rate.
- The new repo facility will be available to firms who are the Bank's counterparties in its daily open market repo operations. It is the Bank's intention that the facility should also provide an opportunity for market participants who are not counterparties of the Bank to obtain longer-term liquidity from the Bank's counterparties for periods ranging across the Y2K date change, against collateral which the Bank's counterparties can in turn use to obtain equivalent-term liquidity from the Bank. The Bank is encouraging its counterparties to make active use of the new facility.
- This notice and the market statement made today are available on the Bank's website .
