Members of New Zealand Inc have a new debt backstop to help them ride out the COVID-19 crisis.
The Reserve Bank of New Zealand announced on Monday that it was planning to start buying corporate bonds from banks this week to keep business well supplied with liquidity.
The RBNZ said a new weekly Open Market Operation (or OMO) will start this week to provide liquidity in exchange for eligible corporate and asset-backed securities.
The OMO will be held each Tuesday and will offer up to $NZ500 million for terms out to approximately three months.
Assistant Governor Christian Hawkesby said this facility would provide another channel for banks to continue funding their corporate clients.
“Our objective is to encourage banks to continue to fund their corporate clients by purchasing their debt securities, given the confidence that these securities can be funded by exchanging them with us for cash.
“In this way, by banking the banks, we are ensuring large businesses can better manage their cash flows, and lower their funding costs,” Mr. Hawkesby said.
The first operation will be held on Tuesday, March 31.
The RBNZ also said it will offer to purchase government bonds maturing on May 15, 2021, for liquidity management purposes. That offer opens on March 31.
