We have warned and warned. Now the RBA is caught between its idiot pride and global markets and economy in free fall.
It’s been obvious for months that the RBA needed to be getting on the front foot to address virus fallout and freezing credit markets. Yet it has poofed around as usual, looking on the bright side, talking up confidence and worrying about its last few cash rate basis points instead of loading up a quantitive easing cannon.
Now that is seen inevitable, at Bloomie:
The Reserve Bank of Australia may kick-start a bond buying program in a few months to buoy a battered economy, said AMP Capital Investors Ltd. Meanwhile, Kapstream Capital, BlackRock Inc. and Nikko Asset Management Ltd. are among funds that have been purchasing bonds in anticipation of further interest-rate cuts and the arrival of quantitative easing.
“The more worried the market becomes about the virus, the closer and closer you have to pull quantitative easing forward,” said Chris Rands, portfolio manager at Nikko, which has been buying Australian semi-government debt. “QE is coming, it’s a matter of when.”
…Yields on three-year Aussie government debt tumbled to a record low 0.33% last week in anticipation of more rate cuts, with money markets expecting the RBA to ease again in April.
After that, quantitative easing is likely to arrive, said AMP Capital Investors Ltd. portfolio manager Dermot Ryan.
“It’s a second half story if it comes,” said Sydney-based Ryan. “Central banks are like generals fighting the last war” with conventional monetary policy now.
It’s coming in May. And if the RBA has any sense at all, it will call an emergency meeting today to cut the last 25bps and announce that QE is starting in April.
Australian funding markets are already locked up. It’s going to get much, much worse, not better as the developed world, then Australia, shut down for COVID-19.
We are into a once per century shock and standing on ceremony is for fools.
