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Repo auctions


A repurchase agreement (repo) is offered via discriminatory auction. In a reverse repo, the Bank of Israel buys tradable government bonds and MAKAM, and sells them back at the end of the transaction term. The selling price is based on the purchase price plus interest.
Repo auctions are open to banking corporations and other supervised entities such as provident funds, insurance companies, pension funds, and mutual funds.

Repo 2008: With the aim of creating an infrastructure for making repo transactions in the market, between 2007 and 2009 the Bank of Israel purchased securities from banking corporations and institutional investors through a tender that aimed to provide liquidity to the market, and sold them back at a predetermined price within one week.  The difference between the purchase price and the resale price is the interest in the transaction.  The Bank of Israel halted the use of this tool in October 2009 in view of the high liquidity surplus in the financial market.

Repo 2020: In view of the COVID-19 crisis, the Bank of Israel launched a repo program with the institutional investors (pension funds, provident funds, mutual funds, and insurance companies) to moderate the excessive volatility in the financial markets and increase liquidity in the markets in which these institutions operate.  As part of the program, the Bank of Israel purchased government bonds, MAKAM, or corporate bonds (according to certain criteria) from financial institutions and sold them back to those institutions one week or one month later at a predetermined price.  The difference between the purchase price and the resale price is the Bank of Israel interest rate.

As a complementary tool to the program of long-term loans to the banking corporations on condition that the banks provide credit to small and micro businesses, in January 2021 the Bank of Israel offered repo transactions to supervised nonbank credit providers.  This was also on condition that they provide credit to small and micro businesses.  As part of the repo transactions with these institutions, the Bank of Israel was able to purchase government bonds, MAKAM, and/or corporate bonds from supervised nonbank credit providers, according to certain criteria, and to sell them back after 6 months.  In this transaction, the interest was set at 0.1 percent, and if the credit was provided to such businesses at an interest rate of prime +1.3 percent or less, the interest was set at -0.1 percent.