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Outline of Transactions for Purchase/Sale of Japanese Government Securities with Repurchase Agreements

日本語

As of August 30, 2024
Financial Markets Department
Bank of Japan

I.  Introduction

This document is an outline of purchases/sales of Japanese government securities (JGSs) with repurchase agreements, which the Bank of Japan conducts based on the "Principal Terms and Conditions for the Purchase/Sale of Japanese Government Securities with Repurchase Agreements." Please note that the following information may change in the future.

II.  Principles

A.  Location of purchases/sales

The Bank's Head Office (Operations Department).

B.  Securities to be purchased/sold

JGSs (Japanese government bonds [JGBs] with coupons and treasury discount bills [T-Bills]).

C.  Repurchase agreements

Securities purchased shall be resold within one year from the day following the purchase date. Securities sold shall be repurchased within six months from the day following the sale date.

D.  Method for auctions

1. In the case of purchases with repurchase agreements:

A multiple-price competitive auction under the conventional method shall be conducted for each purchase in which counterparties bid their desired yields for the period during which securities are held by the Bank.

2. In the case of sales with repurchase agreements:

The Bank shall sell securities through either of the following methods.

  1. a. Competitive auction method
    A multiple-price competitive auction under the conventional method shall be conducted for each sale in which counterparties bid their desired yields for the period during which securities are held by them (here and hereinafter, counterparties' desired yields for the period during which securities are held by the Bank/counterparties will be both referred to as desired yields).
  2. b. Fixed-rate method
    The Bank shall sell securities at the fixed-rate determined in advance based on the prevailing interest rates in short-term money markets.

III.  Auction

A.  Notification of auction guidelines (offer)

When conducting purchases/sales of JGSs with repurchase agreements, the Bank selects auction participants from eligible counterparties and notifies them of the following matters through the Bank of Japan Financial Network System (BOJ-NET).

  1. (a) Type of offer (purchase with repurchase agreements or sale with repurchase agreements)
  2. (b) Sale method (competitive auction method or fixed-rate method) (only for sales with repurchase agreements)
  3. (c) Total amount of offer
  4. (d) Issues to be purchased/sold with repurchase agreements
  5. (e) Purchase/sale date
  6. (f) Repurchase date
  7. (g) Bid-submission cut-off date and time
  8. (h) Yield (only for the fixed-rate method)
  9. (i) Other matters deemed necessary by the Bank

B.  Submission of bids

Auction participants notify the Bank of the following matters through the BOJ-NET by the bid-submission cut-off date and time notified in subsection A.

1. In the case of purchases with repurchase agreements:

Desired sale amount per desired yield and the total amount.

2. In the case of sales with repurchase agreements:

  1. a. Competitive auction method
    Desired purchase amount per desired yield and the total amount.
  2. b. Fixed-rate method
    Desired purchase amount.

C.  Acceptance of bids (notification of respective results to auction participants)

The Bank, after receiving bids as described in subsection B, accepts bids as follows. However, the Bank reserves the right to reject all or some of bids which a counterparty submits when deemed appropriate.

1. In the case of purchases with repurchase agreements:

The Bank accepts bids by starting with the highest desired yield and continuing down until the total amount of bids accepted reaches the amount offered.

2. In the case of sales with repurchase agreements:

  1. a. Competitive auction method
    The Bank accepts bids by starting with the lowest desired yield and continuing up until the total amount of bids accepted reaches the amount offered.
  2. b. Fixed-rate method
    The Bank accepts bids based on the desired purchase amount notified by the auction participants as described in subsection B.

When accepting bids, the Bank notifies auction participants who submitted bids as described in subsection B of the following matters. Here and hereinafter, those who receive such notifications will be referred to as purchasers/sellers.

1. In the case of purchases with repurchase agreements:

Purchase amount per yield.

2. In the case of sales with repurchase agreements:

  1. a. Competitive auction method
    Issues to be sold and the sale amount per issue and yield.
  2. b. Fixed-rate method
    Issues to be sold and the sale amount per issue.

IV.  Purchase/Sale of JGSs and Settlement on Repurchase Date

A.  Purchase/sale of JGSs

1. In the case of purchases with repurchase agreements:

On the purchase date notified in subsection III. A, the purchaser/seller delivers JGSs to the Bank simultaneously with the Bank's payment of the purchasing price to the purchaser/seller.

2. In the case of sales with repurchase agreements:

On the sale date notified in subsection III. A, the purchaser/seller pays the selling price to the Bank simultaneously with the Bank's delivery of JGSs to the purchaser/seller.

B.  Settlement on repurchase date

1. In the case of purchases with repurchase agreements:

On the repurchase date notified in subsection III. A, the purchaser/seller pays the reselling price to the Bank simultaneously with the Bank's delivery of JGSs to the purchaser/seller.

2. In the case of sales with repurchase agreements:

On the repurchase date notified in subsection III. A, the purchaser/seller delivers JGSs to the Bank simultaneously with the Bank's payment of the repurchasing price to the purchaser/seller.

V.  Purchasing/Selling and Reselling/Repurchasing Price

A.  Purchasing/selling price

The purchasing/selling price shall be calculated as follows:

  • Purchasing/selling price (per 100 yen face value)=market price (per 100 yen face value)/margin ratio

B.  Margin ratios

Margin ratios are decided in accordance with the type of offer, the type of JGSs, and their residual maturities. (Please see 1. of "Margin Ratios for the Purchase/Sale of Japanese Government Securities with Repurchase Agreements" for specific numbers.)

C.  Reselling/repurchasing price

The reselling/repurchasing price shall be calculated as follows:

  • Reselling/repurchasing price (per 100 yen face value)=purchasing/selling price × (1+yield (%)/100 × holding period/365)

VI.  Collateral and Margin Calls

A.  Net exposure

Net exposure is the absolute value of the sum of individual loans1.

  1. Notes 1: Individual loans are calculated as follows.

1. In the case of purchases with repurchase agreements:

Individual loans = proceeds the Bank receives when reselling securities to sellers* × margin ratio - market value of securities the Bank has purchased from sellers

2. In the case of sales with repurchase agreements:

Individual loans = market value of securities the Bank has sold to purchasers - proceeds the Bank would pay when repurchasing securities from purchasers* × margin ratio

  • : Calculated by assuming the day of calculating the net exposure is the repurchase date.

B.  Margin calls by the Bank

When a net exposure accrues to the Bank, the Bank shall accept eligible collateral from the purchasers/sellers.

C.  Collateral for purchases/sales of JGSs with repurchase agreements

Collateral accepted under the basic rules concerning collateral as agreed between the Bank and purchasers/sellers.

VII.  Substitution of the Securities

The Bank shall, when deemed appropriate, allow purchasers/sellers to substitute securities that have been sold to the Bank.

VIII.  Operation Timetable

Please refer to the "Operation Timetable" for the timetable of operations described in section III and IV.