November 12, 2019 / 5:23 AM / a month ago

UPDATE 1-Malaysia's central bank extends repo tenor to 5 years to boost liquidity

(Recasts headline and lead, adds details and background)

KUALA LUMPUR, Nov 12 (Reuters) - Malaysia’s central bank on Tuesday extended the maximum tenor for a repurchase agreements, or repo, to five years, as it looks to boost liquidity and avoid a downgrade by global index provider FTSE Russell.

Malaysia remained on a watchlist on FTSE Russell’s World Government Bond Index (WGBI) after a September review, six months after it was flagged on liquidity concerns.

Bank Negara Malaysia announced the change in a statement here, releasing a policy document that set out the revised requirements and expectations of the bank on market participants which enter into repo transactions involving ringgit and non-ringgit repo and reverse repo transactions.

The previous maximum tenor for repurchase agreements was 365 days.

A repo is a form of short-term borrowing for dealers in government securities.

The central bank said dealers will also be given access to a broader range of eligible securities under repo transactions, and will face less red tape in conducting cross-currency repo transactions with ringgit securities.

In August, the central bank issued revised repo guidelines for industry consultation, which proposed “new flexibilities” such as a longer tenor limit and wider range of repo securities.

The revised guidelines were part of BNM’s response to FTSE Russell putting Malaysian government bonds on its watchlist in April.

FTSE Russell will provide another update after an interim review in March. (Reporting by Krishna N. Das and Joseph Sipalan; Editing by Kim Coghill & Simon Cameron-Moore)

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