The Bank of Israel will begin conducting Repo auctions from October 2007 with financial institutions and banks

14.10.2007
 
The Bank of Israel will begin conducting Repo auctions from October 2007 with financial institutions and banks
 
  Repo operations are one of the most important tools in the global money markets and as such many central banks use repo as a monetary tool.
  The aim of the Bank of Israel's repo operations is to promote the development of the repo market, and by so doing, advance the deepening and refinement of the capital market.
  In the framework of the repo operations, the Bank of Israel will purchase government bonds and makams (Treasury bills) and will sell them back after one week at a predetermined price.
The Monetary Department at the Bank of Israel announces that from 17/10/07 the Bank will, for the first time, begin repo auctions in the capital market, in the framework of which it will buy government bonds and makams (Treasury bills) from financial institutions and banking corporations, and then will sell these back one week later at a predetermined price. This differs from the repo tenders that the Bank of Israel conducted in the period 2004 to 2006, when it sold makams and bought them back one week later.
Repo transactions are one of the most important financial instruments in the international markets, and the volume of these transactions in the developed world is constantly rising. Repo operations are used by a wide variety of investors, including market-makers, banks, financial institutions, and institutional investors. The repo operations have a wide variety of financial uses, including the supply of immediate liquidity to managers of financial asset portfolios, cash flow management, risk diversification and the achievement of extra yields for portfolio managers. Repo operations are one of the most important tools for interest-rate management, used by many central banks worldwide.
The aim of the Bank of Israel's repo operations is to promote the development of repo deals between the various financial institutions active in the Israeli capital market. Such operations will contribute to a deepening and refinement of the markets and will help to improve liquidity and tradability in the securities market, and will also help market-makers' activities. This will be because, inter alia, repo operations in such significant amounts are likely to contribute to lowering the costs associated with maintaining an inventory of stocks for market-makers and other financial investors. The development of the repo market in Israel may also boost competition with the banking system, as repo constitutes an alternative source of raising loans on the one hand and depositing money on the other.