Terms of Sales of New Zealand Government Securities

Dated 7 June 2022
Memorandum of Understanding relating to terms of Sales of New Zealand Government :Securities Between RESERVE BANK OF NEW ZEALAND And NEW ZEALAND DEBT MANAGEMENT, CAPITAL MARKETS DIRECTOHATE, THE TREASURY

MEMORANDUM OF UNDERSTANDING made this
BETWEEN:
7th day of June
(1) RESERVE BANK OF NEW ZEALAND ("Reserve Bank"); and (2) NEW ZEALAND DEBT MANAGEMENT, CAPITAL MARKETS DIRECTORATE, THE TREASURY ("NZDM") RECITALS A. On 23 February 2022, the Monetary Policy Committee (MPC) of the Reserve Bank agreed to commence, from July 2022, the gradual rieduction of the Reserve Bank's bond holdings under the Large Scale Asset Purchase (LSAP) programme through both managed sales of New Zealand Government Bonds (NZGBs) to NZDM at a rate of NZ$5,000,000,000 per financial year and bond maturities. B. The purpose of this Memorandum of Understanding is to record certain terms and understandings upon which the parties have agreed to progress individual sales.
C. Nothing in this Memorandum of Understanding is intende:d to commit the parties
to any individual sale of NZGBs (which must be agreed and documented at the time of sale), but it does set out the in-principle agreeiment of the parties to proceed on the basis set out herein. D. Contained in the Annexure to this Memorandum of Understanding is a summary of its key terms which the Reserve Bank intends to publish. IT IS HEREBY AGREED as follows:

1. SALES
   1.1 Annual Sale Programme
   (a) Sales of NZGBs to NZDM will commence in Jiuly 2022 at a rate of $5,000,000,000 per financial year (Annual Sales Vc:>lume), and is intended to continue until the Reserve Bank's holdings of NZGBs purchased under the LSAP programme are reduced to zero; (b) It is intended that sales of $415,000,000 will occur in each of the months from July - May, and the remaining $435,000,000 will occur in June each year (each a Sale); (c) The Reserve Bank intends to sell NZGBs in order 01' length of maturity, with the longest maturity NZGBs to be sold first, while shorter maturity bonds will mature without reinvestment;

(d) Only the Reserve Bank may amend the Annual Sales Volume, for the purpose of implementing monetary policy formulated by the MPC.
1.2 Process for Monthly Sales
(a) Sales will be executed on the 151 h calendar day of each month (or, if that day is not a business day the business day that follows the 151 h calendar day of each month) (Trade Date). (b) The Reserve Bank shall initiate a Sale by delivering a sale notice in the form set out in the Schedule (Sale Notice) no later than 11am on the Trade Date, together with any other information that NZDM may reasonably request. (c) NZDM will acknowledge receipt of a Sale Notice by email to the Reserve Bank by close of business on the Trade Date. (d) Subject to clause 2 (Pricing Fallback), upon receipt of a Sale Notice, NZDM will price the Sale using the New Zealand Governm1ent Bond Market Closes price as published by New Zealand Financial Markets Association, for the specified maturity on the Trade Date, in yield to 3 decimal places. (e) Settlement of a Sale is by delivery versus payment through NZClear on a trade date plus two business days (T +2) basis.
1.3 Alteration of Sales
(a) If it considers necessary in light of market conditions, the Reserve Bank may alter, halt or cease Sales at any time. How«3ver, the parties do not foresee any such changes to be common, and intend that any halt of sales would only occur for a maximum of one calendar month. (b) Clause 1.3(a) does not apply to any Sale in respect of which a Sale Notice has already been delivered but has not yet settled.
1.4 Business Day
For the purposes of this Memorandum of Understanding, 'business day' means a business day in Wellington, New Zealand.
2. PRICING FALLBACK
If, on any Trade Date, the New Zealand Financial MarkEits Association is unable to or does not publish the New Zealand Government Bond Market Closes price, the parties will work together in good faith to agree a suitable fallback price.

3. ONGOING COLLABORATION
   The Reserve Bank and NZDM will continue to collaborato closely in relation to all matters to which this Memorandum of Understanding refers, and more broadly to ensure the efficient functioning of the New Zealand Government Bond market. This clause does not limit a party's need to maintain confidentiality of policy decisions.
4. NOTICES
   Any notice sent for the purposes of this Memorandum of Understanding other than on a business day or after 5.00 p.m. on any business day shall be deemed to be delivered at 9.00 a.m. on the immediately succeeding business day. Execution:
   New Zealand Debt Management, The
   Treasury by
   Chris Chap an, Executive Director
   (acting), Capital Markets
   Reserve Bank of New Zealand by
   Vanessa Rayner, Director of Financial
   Markets

SCHEDULE - SALE NOTICE
From: Reserve Bank of New Zealand
To: New Zealand Debt Management, Capital Markets Directorate, The Treasury No. 1 The Terrace Wellington Email: portfoliomanagement@treasury. govt. nz Dated:
NOTICE OF SALE OF NEW ZEALAND GOVERNMENT SECURITIES Capitalised terms not defined in this notice have the meaning given to them in the Memorandum of Understanding relating to the terms of sales of New Zealand Government Bonds dated [[]2022]. We request a Sale as follows:
NZGB(s) to be sold:
Nominal Value of NZGBs:
[New Zealand Government Nominal Bond/ Inflation Indexed Bond] maturing on [x] [$415,000,000 I $435,000,000 I [specify]] Other information relating to Sale (if applicable):
Yours faithfully authorised signatory for Reserve Bank of New Zealand

ANNEXURE - SUMMARY OF INDICATIVE TERMS
Large Scale Asset Purchase (LSAP) Programme Indicative Key Terms for the sale of New Zealand Gov1ernment Securities to New Zealand Debt Management This document outlines the indicative key terms of sales agreed between the Reserve Bank of New Zealand (Reserve Bank) and the New Zealand Debt Management (NZDM) for New Zealand Government Bonds (NZGBs) from the Bank's Large Scale Asset Purchase (LSAP) Programme portfolio. The complete terms of sale for individual transactions will be established at the time of those sales. Commencement Date/Frequency Offer Yield Expected monthly transaction size Annual transaction volume Securities Method of Transaction Settlement July 2022. 15th calendar day of each month or, if that day is not a business day, the business day following the 15th calendar day of each month. NZGB Market Closes as published by New Zealand Financial Markets Association, for the specified maturity, in yield to 3 decimal places. $415,000,000 nominal (for months from July - May); $435,000,000 nominal (June). $5,000,000,000 nominal The Reserve Bank will determine the specific maturities to be offered to NZDM from the RBNZ's LSAP Programme portfolio. The Reserve Bank will send through orders to NZDM by 11am on trade date. Transactions will be initiated via email, recorded deal ing line or approved dealing platform . Confirmation will be sent following agreement. Settlement is by delivery versus payment through NZClear on a trade date plus two business days (T +2) basis

Consideration
Publication
Cessation of sales
Business day
Consideration will calculated using the price and yield formulate stated in Appendices and Application Forms on the Re serve Bank's website (https:/ /www.rbnz.govt.nz/ - /media/ReserveBank/Files/Markets-and￾payments/Domestic￾ma rkets/3287159. pdf?revi si on=2a3253f 4-9bb2 - 4bba-a54b-07 4927340596) The Reserve Bank will publish details of transactions via the Reserve Bank's statistical releases on the following business day (T +l). Details can be found here:
https:/ /www.rbnz.govt.nz/statistics/ d3 If it considers necessary in light of market conditions, the Reserve Bank may alter, halt or cease sales at any time. The Reserve Bank will inform NZDM any intention to do so, subject to appropriate confidentiality of policy decisions. For the purpose of these terms of sale, 'business day' means a business day in Wellington. On-going monitoring of NZDM and the Reserve Bank will continue to the NZGB market collaborate closely to ensure the efficient functioning of the NZGB market.