Bank of Canada rogers sleeping RBA

From the Bank of Canada overnight:

In order to support the continuous functioning of financial markets through the provision of liquidity, the Bank of Canada announced two measures today.

First, acting as fiscal agent, the Bank will broaden the scope of the current Government of Canada bond buyback program. This is intended to add market liquidity and support price discovery. Until further notice, buybacks will extend across all benchmark maturity sectors and will be conducted at least weekly. Regular weekly operations will be conducted on a switch basis. Cash buybacks will be conducted following nominal bond auctions.

The first operation will be a $500 million switch operation in the 30-year sector held on Monday March 16. Additional program details are forthcoming, including the timing of the first operation.

Second, to proactively support interbank funding, the Bank of Canada will temporarily add new Term Repo operations with terms of 6 and 12 months.  These operations will occur bi-weekly starting with the first operation on Tuesday, 17 March 2020.

Let’s compare the Canadian bank index to the Australian:

If anything, we are worse.

Is it any wonder? Canada is northern hemisphere.  The virus will have peaked and be passing there just as it is intensyfing here into an August/September peak. Canada ought to be recovering into Q4. The Aussie economy will be in recession all year.

Canada still has 120bps of cash rate to cut yet it has pushed aggressively into QE to cap bond yields and keep its currency under pressure.

Where is the RBA?

David Llewellyn-Smith
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  1. Dave, Aus bond yields are spiking…do you think this is more bond liquidation to cover trading positions?

    Surely the RBA is just about to announce QE…or will they ‘look through’ the current yield spikes?

  2. DingwallMEMBER

    From the SMH “Markets Live”

    Australia’s central bank injected an unusually large amount of cash into the financial system on Friday as panic selling across global markets driven by the coronavirus threatened to drain liquidity and push up borrowing costs.

    In its daily money market operation the Reserve Bank of Australia (RBA) pumped $8.8 billion into the system through repurchase agreements, well above the estimated requirement of A$3.4 billion.

    The money was leant for periods ranging from 17 to 95 days, with A$5.6 billion going at the longest date.

    Reserves held by the RBA for financial institutions have been rising steadily for several days amid a general hunt for liquidity by banks globally.

    “There’s definitely strains in the market, and the RBA has acted to add extra liquidity to offset that,” said Martin Whetton, head of bond and rates strategy at CBA.