Auctions of repo transactions
The main function of this instrument is managing the liquidity of the banking system in conditions of short-term movements of the liquidity, which could lead to significant fluctuations in the short-term interest rates. Auctions enable liquidity withdrawal through prompt sale of securities with obligation for their repurchase on a future date at predetermined price and vice versa, liquidity providing through prompt purchase of securities with obligation for their re-sale on a future date at predetermined price.
Auctions for providing liquidity are held at regular periods, while auctions for withdrawal of liquidity are executed on initiative of the National Bank. The amount and maturity of the repo transactions is determined according to the projected movements of the autonomous factors which influence liquidity. All banks are entitled to participate in the auctions.
Repo auctions may be conducted through two main types of tenders:
a) Interest rate tender: in the prospectus sent to the banks, National Bank announces the amount, and the banks bid with amounts and interest rates;
b) Volume tender: in the prospectus sent to the banks, National Bank announces fixed interest rate at which repo transactions will be realized, and the banks bid only with amounts.
Repo transactions are concluded according to the General Repo Agreement, while the eligible collateral are securities according to the List of Securities for Conducting Monetary Operations.