Cash targets tightened

Press, 4 November 1986, Page 23

Cash targets tightened

The Reserve Bank has again tightened the margins within which trading banks must collectively target their daily cash balances. The target has been cut to S3OM from S4OM. Recently it was cut from SSOM, where it had been for some months, to S4OM. Some in the financial market believe the Reserve Bank is merely .tightening limits as the banks become more adept at achieving cash targets. But the interest rate for call money rose to 18.25 per cent yesterday, compared with 17.70 per cent on Friday, and 16.65 per cent on Thursday.

The bank said the ease with which the money market had operated with the $4O million target during October signalled that a further reduction was warranted, the Press Association reports.

“The lower daily aiming level will ensure that short-term liquidity management operations continue to be consistent with the thrust of the Government’s mediumterm monetary policy stance.”

The previous cut was made because the bank said it had developed more accurate methods of estimating the daily cash available.

Monthly stock tenders, weekly bill tenders and

daily money market open operations are methods used by the bank to attract spare community cash into Government coffers, leaving free balances of around the target level.

The bank made its announcement yesterday in its weekly statement of the size of the Treasury bill tender. It said this week’s tender will be for SIBSM with four maturities. Bills to be offered are SSOM at 49 days, SSOM at 112 days, SSOM at 133 days and S3SM at 168 days.

The rise was despite the Reserve Bank’s advancing S2OM by sellback deals secured by November 10 stock at 17.84 to 18 per

cent Prime 98-day commercial bills eased slightly to 16.75 per cent (Friday 16.8 per cent). Three-year Government stock was slightly easier at 16 per cent (Friday 16.05 per cent) while 16-month stock eased to 16.05 per cent (Friday 16.1 per cent). Five-year stock was unchanged at 15.7 per cent for February 1992 and 16.8 per cent for September, 1991. Dealers said the market had been assisted by Friday’s . figures from the Treasury which showed the Government deficit to be close to the Budget forecast.

This had helped assure the market that stock tenders were unlikely to be held in the March quarter.