Reserve Bank of New Zealand highlights importance of repo market

Reserve Bank of New Zealand Assistant Governor Money Karen Silk has highlighted the increasing importance of the repo market in supporting financial system resilience and monetary policy implementation. Speaking at the KangaNews Debt Capital Markets Summit in Auckland, Silk described the repo market as the ‘financial market plumbing’ essential for transmitting policy stances through the financial system.

Recent changes to the Reserve Bank’s liquidity management framework now place weekly repo operations at the center of its approach to supplying liquidity. Silk noted that a well-functioning repo market helps distribute cash across the financial system, which can reduce the amount of settlement cash required and minimize the central bank’s direct footprint in the markets.

Silk called on market participants to improve the depth, liquidity, transparency, and resilience of New Zealand’s repo market. She suggested that increased counterparty relationships, better pricing transparency, and improved market infrastructure would lead to stronger monetary policy transmission and more dynamic capital markets.