The Reserve Bank of New Zealand (RBNZ), aiming to ensure stability and certainty in the current global economic climate, has released details of changes to its open market operations (OMOs).
The RBNZ will now hold regular OMOs every Tuesday using only corporate and asset-backed eligible securities as collateral.
OMOs can be held daily but are currently only used when they are needed to manage liquidity in the domestic market, RBNZ spokesman Mike Hannah said.
The RBNZ last year widened the range of securities used in OMOs so securities guaranteed by the New Zealand government, and New Zealand corporate securities denominated in New Zealand dollars, with a long term credit rating of BBB minus or better, would be eligible.
Short term securities with a credit rating of A2, F2, P2 or better were also eligible as were New Zealand dollar denominated asset backed securities rated AAA, A1 plus, F1 plus or P1.
The new Tuesday operation narrows the range for the one day.
The change was made for "convenience" because it was easier and gave the market focus, Mr Hannah said.
He said the change had been planned since May last year and "won't surprise the market".
"It's ensuring that while overseas credit markets are unsettled (settlement banks) have access to the funding they normally get overseas."
The change would help stabilise the market during the global financial turmoil by ensuring liquidity remains unchanged, he said.
The new operation will typically offer $250 million for terms out to three months and other conditions apply.
The new operations will begin at 9.30am on January 20.
The change is temporary and will remain in place while markets remain unsettled.
OMOs allow the RBNZ to inject or withdraw funds into the market by trading bonds and securities with the major banks, known as settlement banks.
