Cancellation of Repo Tenders

Cancellation of Repo Tenders
The Bank of Israel announces that from the beginning of January, 2007, it will stop conducting repo tenders (auctions on repurchase agreements) on makams (Treasury bills). In March 2004, the Bank of Israel began selling one-year makams to winners of such tenders at a single, known price, agreeing to repurchase these bills at a future date and at a price set in the tender. Banks and other participants in the financial markets were free to submit offers in the auctions.
Recently the Bank of Israel completed the process of switching its major monetary instrument––moving from the issue via tenders of interest-bearing deposits exclusively to banks, to the issue of makams to the general public through regular tenders; both these operations are intended to absorb excess liquidity in the market. Currently, the situation has been reached where the banking system's needs for liquidity requires them to take monetary loans from the Bank of Israel throughout each month, and there is therefore no current need for liquidity absorbing repo operations. These are the instruments that the Bank of Israel uses to set its interest rate.
The Bank of Israel's Monetary Department notes that the aim of the repo operations was to improve the awareness of the financial community to the possibilities of such operations, which are practiced worldwide, as well as to conduct its monetary policy through the use of several tradable financial instruments with the market as a whole (banks and other market players), as is also common practice among central banks worldwide. The development of non-bank financial intermediaries will also improve the efficiency of the capital market and will contribute to liquidity and tradability in the securities markets. In particular, repo operations in Israel will help market-makers' operations and the management of collateral in the real time gross settlement (RTGS) payment system which the Bank of Israel will shortly be launching.
The Bank of Israel will continue to promote and support the development of repo operations in Israel, in all forms, and it intends to restore its own repo-type operations in the future in accordance with the liquidity needs of the banking corporations.