Reverse Repo Facility
21 June 2006
The National Treasury announces the General Terms and Conditions of the
Reverse Repurchase Agreement Transactions Facility (Repo Facility) in Inflation
Linked Bonds (ILBs).
The ILB Reverse Repo facility will be conducted by the South African Reserve
Bank (SARB) on behalf of the National Treasury on an auction basis. All market
participants are given until the 28 June 2006 to engage the National Treasury
and the SARB to clarify any issues of uncertainty regarding the repo facility.
The effective date of the repo facility will be announced in due course.
The Terms and Condition of the ILB Reverse Repo Facility are as follows:
a. The Size of the ILB Reverse Repo Facility
The total nominal amount under this facility will not exceed R1billion.
b. The Maturities on Offer
All existing maturities will be on offer i.e. R198 (3.8%:2008), R189
(6.25%:2013), R197 (5.5%:2023) and R202 (3.45%:2033).
c. The ILB Reverse Repo Auctions
* The auctions will be conducted on a weekly basis.
* The term/tenure of the repos will be disclosed in the invitation.
* The announcement will be made at 08h30 on the morning of the auction on the
SARBâs wire services pages.
* The auction will, unless specified otherwise, be conducted on
Thursdays.
* The auction will close at 10:00 and the results will be released at 11h00 on
the SARBâs wire services pages.
* Bids cannot be changed after the auction has closed.
* Bids should specify:
1. The cash amounts which the participants want to invest in the ILB reverse
repo auction.
2. The reverse repo rate which the participant wants to earn on the cash amount
tendered (expressed to the nearest 0, 01%).
* Participants are required to submit bids in minimum cash amounts of
R5 million, and thereafter, in multiples of R1 million.
* Bids will be allocated in an ascending order based on the individual reverse
repo rates tendered.
* The amounts allocated for each of the bonds on offer will be at the
discretion of the National Treasury who may decide to allocate all or nothing
of the bonds on offer.
* Settlement will take place on a T+3 basis.
* Cash settlements will take place via SAMOS.
* In terms of the established convention with respect to reverse repos
conducted by the SARB, the coupon interest on the bond will be payable to the
supplier of the stock.
* Bids must be submitted to the SARB via the Money Market Internet System
(MMIS).
* In case the MMIS is not functional, participants should call the SARBâs
dealing desk (012-313 4952/7) with the details of their bids, before the
auction closes. Telephonic bids should be confirmed with a confirmation fax to
the dealing room (012-313 4278).
d. Valuation Rates
* The Reference CPI rates, as well as, the index ratios needed for the
calculation of the nominal amounts of ILBs to be allotted to successful bidders
will be released with the auction invitation.
* The prevailing real yields on the respective ILBs will be provided by the
SARB at the closure of the auction on its wire services pages.
e. Maturity of the Reverse Repurchase transactions
On maturity of the reverse repurchase transaction, the ILBs will be
repurchased from participants at the agreed price. Upon receiving payment (via
SAMOS), participants must deliver the equivalent securities purchased in the
first leg of the transaction.
f. Margin Maintenance
Participants will be called for margin in order to mitigate against market
and credit risk.
1. ILBs held by the counterparty are marked-to-market daily using BESA
closing rates. The SARB will call for margin if the market value of the ILBs
exceeds the cash plus total interest for the period of the transaction
(repurchase price) by an amount equal to or greater than R1 million.
2. If the repurchase price exceeds the total market value of the ILBs purchased
by participants by R1 million, the SARB will at the request of the
counterparty transfer the excess margin.
3. Interest on cash margins will be calculated at the SAONIA rate on a daily
basis and paid to the counterparty at maturity of the reverse repurchases
transaction. The same principle will apply when the SARB is called for
margin.
g. Participation
Participants should have signed both the SARBâS Master Repurchase Agreement
(MRA) and the addendum to the MRA in order to participate in the ILB reverse
repo auctions.
Enquiries:
André Pillay
Chief Director: Liability Management
Tel: (012) 315 5337
Issued by: National Treasury
21 June 2006
