	bahrain introduces new money market regime bahrain is introducing a new domestic money market regime to provide dinar liquidity aid centred on the island s newly launched treasury bill programme the bahrain monetary agency has issued a circular to all commercial banks outlining a new policy from april which gives liquidity aid through sale and repurchase agreements in treasury bills or through discounting them the circular released officially to reuters said current arrangements for providing liquidity aid will no longer be valid except in quite exceptional circumstances under the current system the agency provides the island s commercial banks with dinar liquidity by means of short term swaps against u s dollars and less frequently by short term loans secured against government development bonds the agency considers that it is now appropriate to replace these operations with short term assistance based on government of bahrain treasury bills the circular to banks states the agency said it will repurchase treasury bills with a simultaneous agreement to resell them to the same bank at a higher price which will reflect an interest charge the agency said it envisages the repurchase agreements will normally be for a period of seven days bahrain launched a weekly tender for two mln dinars of day treasury bills in mid december last year and has since raised a total of mln dinars through the programme bahrain s commercial banks are currently liquid and have been making little use of the traditional dollar swaps offered by the agency but banking sources said the new regime from april will mean banks cannot afford not to hold treasury bills in case they need funds from the central bank banking sources said more than half of the banks hold treasury bills although the need by others to take up paper could increase demand at weekly tenders and push down allotted yields slightly last week s yield was six pct although the programme had started at the end of last year with rates as low as pct banking sources said the cost of liquidity through repurchase accords will not differ much from that on dollar swaps but a bank using dollars to obtain liquidity would foresake interest on the u s currency while the underlying treasury bill investment is unaffected in a repurchase accord reuter 
