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Sarb to start rand reverse repos to manage market liquidity

‘The buy-sell backs will be conducted on an ad hoc basis, as and when required,’ Sarb said in a statement.
Image: Waldo Swiegers/Bloomberg

South Africa’s central bank will extend its tool kit to manage market liquidity by adding short-term, bilateral reverse repurchases of government bonds from commercial banks, it said on Friday.

The South African Reserve Bank (SARB) has taken a number of measures since March to manage market liquidity as the spread of the coronavirus crisis globally hit demand for government bonds, including the launch of a bond-buying programme.

The bank has decided to expand such operations, it said in a statement, with changes to be introduced from August 3.

“The Sarb will commence conducting short-term buy-sell backs, of up to one month, with commercial banks on a bilateral basis for the purposes of managing money market liquidity,” it said, using a term for reverse repurchases.

The programme would be on an ad-hoc basis, it said, while the sum on offer would be at the Sarb’s discretion.

It added that the Sarb would also apply greater flexibility by allotting debentures and long-term reverse repurchases at a wider variety of rates.

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Is this just a coincidence – coming 24hrs after the ZAR spiked up above a 4mth descending trendline, i think not.

Lesetja is going to have to use every tool he has and some, to manage the fall out from lock down – that is now really starting to gather steam.

Under lock down rules – access to our ‘greater society’ is rather limited. However, the ZAR is a very keen and sensitive gauge and will tell you all you need to know.

End of comments.

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