Reserve Bk pumps in $230 million
PA Wellington A Reserve Bank error in Tuesday’s forecast of the expected flow of bank notes resulted in the bank injecting S23OM into the short-term money market yesterday morning. As a result, rates being offered for large sums of cash at call dropped dramatically from around 27 per cent to about 21% nominal and most dealers withdrew from the market. The chief manager,
financial markets, Mr Alan Smith, told NZPA the banking system ended the day short of about S7SM, instead of being about S3OM in credit.
“To restore liquidity and primary liquidity levels through the next week or so we decided to make a large cash injection today,” Mr Smith said.
“We expect to withdraw some cash from the market tomorrow (Wednesday). Our move this morning (Tuesday)
was a desire to make sure the system is not unduly tight over the holiday period. There should be no need for dealers to pay the rates they have been over the last few days (around 24%).
The bank’s cash injection was by way of sell back to January 1, 1987, to be secured by Government securities.
Rates offered ranged from 24.01% to 26.76%. Bids totalled $619 million.
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Press, 24 December 1986, Page 10
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202Reserve Bk pumps in $230 million Press, 24 December 1986, Page 10
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