This section includes information on the DMO’s cash management activities.

The DMO took over full responsibility for Government Exchequer cash management, from the Bank of England, on 3 April 2000. The DMO’s cash management remit is published annually by HM Treasury and its cash management objective is to ensure that sufficient funds are always available to meet any net daily central government cash shortfall and, on any day there is a net cash surplus to ensure that this is used to best advantage.

The DMO’s role is to make arrangements for funding and for placing net cash positions, primarily by carrying out market operations in the light of forecasts provided by HM Treasury of daily net cash flows into or out of the National Loans Fund (NLF). The DMO’s objective in carrying out these operations is to minimise the cost of offsetting the Government’s net cash flows over time, while operating in a risk framework approved by Ministers. In doing so the DMO seeks to avoid actions or arrangements which would undermine the efficient functioning of the sterling money markets or conflict with the operational requirements of the Bank of England for monetary policy implementation.

The Exchequer's cash flow has a fairly regular seasonal and monthly pattern; but it is also subject to considerable uncertainty, associated largely with unpredictability in the timing of some tax and expenditure flows. The DMO's approach is to rough tune the seasonal pattern of flows mainly through weekly issuance of Treasury bills and bilateral dealing in a range of money market instruments.

The variation in the forecast of Exchequer flows means however that there is usually a need to fine tune the flows and this is done through bilateral dealing on a daily basis, mainly in the secured markets.

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