BOJ implements relaxed measures for securities lending facility
29 November 2022 Japan
Image: yu_photo/stock.adobe.com
The Bank of Japan (BOJ) has relaxed the terms applicable to its securities lending facility for 10-year Japanese government bonds (JGBs), enabling it to lend bonds purchased through its asset purchase programmes back into the market.
The move aims to ensure stability in the market by easing excessive tightening in the supply and demand of Japanese government securities in the repo market, enabling the central bank to offset potential concerns around collateral shortages and to manage market liquidity.
The BOJ will continue to purchase cheapest-to-deliver bonds under the relaxed conditions, which will come into effect from 30 November. Under the relaxed terms, the Bank of Japan has extended the maximum number of consecutive days for purchases of a specified security from 50 to 80 days.
Prior to the relaxation, lending was permitted for cheapest-to-deliver issues where the BoJ’s holdings in the market exceeded 80 per cent. From 30 November, this restriction will be lifted to embrace all cheapest-to-deliver issues, regardless of the Bank’s holdings in the security.
The move aims to ensure stability in the market by easing excessive tightening in the supply and demand of Japanese government securities in the repo market, enabling the central bank to offset potential concerns around collateral shortages and to manage market liquidity.
The BOJ will continue to purchase cheapest-to-deliver bonds under the relaxed conditions, which will come into effect from 30 November. Under the relaxed terms, the Bank of Japan has extended the maximum number of consecutive days for purchases of a specified security from 50 to 80 days.
Prior to the relaxation, lending was permitted for cheapest-to-deliver issues where the BoJ’s holdings in the market exceeded 80 per cent. From 30 November, this restriction will be lifted to embrace all cheapest-to-deliver issues, regardless of the Bank’s holdings in the security.
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