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The Reserve Bank of New Zealand has put out a press release that state that Te PÅ«tea Matua today announced that it will be removing some of the temporary liquidity facilities put in place during the COVID-19 pandemic.

Press release

The specific measures include:

  • The removal of the Term Auction Facility (TAF) where banks have been able to borrow funds for 3, 6 and 12 months using eligible collateral, including NZ Government securities, registered bank bills and Residential Mortgage Backed Securities (RMBS).
  • The removal of the Corporate Open Market Operation (COMO) where banks have been able to borrow funds for 3 months using eligible collateral, including corporate securities and asset backed securities.

Market implications

Head of Financial Markets Vanessa Rayner said, “Financial market conditions have improved significantly since March 2020 when these facilities were introduced and the usage of these special facilities has been very low in the last six months. In addition, the Large Scale Asset Purchase, Term Lending Facility, and Funding for Lending programmes have resulted in a significant increase in system liquidity and a lower cost of funding for banks.”

“The Reserve Bank will continue to monitor market conditions closely and is in a position to supply liquidity as required via its daily Open Market Operations or the reinstatement of these special facilities in the future if needed,” Ms Rayner says.

“This decision has no implications for the stance of monetary policy,” and therefore we are not seeing a reaction the currency.