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Education
A Case Study of Liquidity Management on 3 August 2016
Chris Becker & Stephanie WoonFinancial Markets Group
Source: RBA
Reserve Bank Open Market Operations
What is the main purpose of the Reserve Bank’s open market operations?
… liquidity management.
Bank A Bank BEconomic
agentsEconomic
agents
Receipts
Payments
Liquidity Management of Interbank Obligations
Liquidity Management of Interbank Obligations
Bank A Bank B
Reserve Bank
Government
Economic agents
Economic agents
Receipts
Payments
Outflows like tax payments to ATO
Inflows like government welfare payments
Liquidity Management Illustration
What did the Reserve Bank do in open market operations on a day the target cash rate was changed?
… 3 August 2016
Liquidity Management on 3 August 2016
Bank A Bank B
Reserve Bank
Government
Economic agents
Economic agents
Receipts
Payments
Outflows -$5 billionInflows +$3 billion
Liquidity Management on 3 August 2016
Bank A Bank B
Reserve Bank
Government
Economic agents
Economic agents
Receipts
Payments
Outflows -$5 billionInflows +$3 billion
OMOs +$2 billion
OMO Announcement on 3 August 2016
Allocation Screen
Notification of Results
Repurchase Agreement
Central bank BankInject cash
Securities
First Leg: 3 August 2016
Central Bank
Second Leg: 3 August 2018
D19/27137 GENERAL
Central bank Bank
Central bank BankInject cash
Securities
Second Leg: 3 August 2018
Inject cash
Securities
Repurchase Agreement
Central bank BankInject cash
Securities
First Leg: 3 August 2016
Central Bank
Second Leg: 15 Aug and 7 Oct
Central bank Bank
Central bank
Drain cash
Securities
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