The Central Bank of New Zealand Adds Local Government Debt to the Stimulus Plan | Instant News

SYDNEY – The New Zealand central bank on Tuesday said it would buy up to $ 3 billion ($ 1.79 billion) from local government debt to ease liquidity tensions on the funding market as it moves to protect the economy from the effects of the coronavirus pandemic.

The Reserve Bank of New Zealand (RBNZ) said the new move will be extended to the Large-Scale Asset Purchase (LSAP) program, which has bought government debt.

“The bank has been watching for signs of increased liquidity and dislocation in the markets of the Regional Government Funding Agency (LGFA) especially in recent weeks,” he said in a statement.

Tensions in this important market “pose significant risks to the transmission of monetary policy” and need to be addressed, the bank said.

As a result, the bank’s policy-making committee held a conference call on April 4 to discuss the problem and authorize the purchase of LGFA debt.

The bank plans to buy up to $ 3 billion of LGFA debt on the secondary market in the next 12 months, or about 30 percent of the total issued LGFA debt. This step takes the total size of LSAP to NZ $ 33 billion.

The committee will update the economic assessment and the size and scope of the LSAP at the next meeting set for May 13, the bank added.

($ 1 = 1.6787 New Zealand dollars)

(Reporting by Wayne Cole; Editing by Shri Navaratnam)

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