Finally RBA prints

From Phil Lowe just now:

As Australia’s financial system adjusts to the coronavirus (COVID-19), financial regulators and the Australian Government are working closely together to help ensure that Australia’s financial markets continue to operate effectively and that credit is available to households and businesses. Refer to earlier CFR press release. Australia’s financial system is resilient and it is well placed to deal with the effects of the coronavirus. At the same time, trading liquidity has deteriorated in some markets.

In response, the Reserve Bank stands ready to purchase Australian government bonds in the secondary market to support the smooth functioning of that market, which is a key pricing benchmark for the Australian financial system. The Bank will also be conducting one-month and three-month repo operations in its daily market operations until further notice to provide liquidity to Australian financial markets. In addition the Bank will conduct longer term repo operations of six-months maturity or longer at least weekly, as long as market conditions warrant. The Reserve Bank and the AOFM are in close liaison in monitoring market conditions and supporting continued functioning of the market.

The Bank will announce further policy measures to support the Australian economy on Thursday.

Just don’t call it an emergency meeting. Might spook the horses.

AUD smashed.

David Llewellyn-Smith
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Comments

    • They dont want to get lost in the Fed noise…also let everyone else puke first this week…

    • Yeah, it’s looking like jawboning and the market has now (at 1:30 pm EDST) started to reverse and the bid for the TP returns. Because you can never have enough TP in a crisis!

  1. The market smelled this coming – ‘splains wide the AUD got hosed on the open.

    Or should I say, some insiders knew it was coming and shorted the crap out of it.

    • No insider trading necessary, reckon everyone with half a clue (which even includes me) knew it was inevitable albeit a bit slow coming. Same thing with the “surprise” Fed cut overnight, it was already assumed and priced, only the timing was up in the air a bit.

    • I bet a lot of currency traders got stopped out or short squeezed one way or the other, the poo went zinging between 61.1 and 62.8 and back up and down at least twice, it was insane.

  2. Fear is very high and everything is happening much too fast.
    We may be at a situation where the more central banks throw at this to more scared people become.
    Instead of reassuring the markets, people are now questioning how bad is this.

  3. Cool. I feel less unemployed already.

    Jokes aside, I hope this helps others stay in work, but suspect it will mainly help the top end.

  4. Unrelated. My sources tell me that Telcos are going to limit bandwidth for streaming (Netflix/YT/etc). This is to free up bandwidth for the masses working from home.

  5. You can get 3.00s on Sportsbet that the RBA don’t move rates on the 7 April meeting. If they cut on Thursday rates won’t move on 7 April.

  6. happy valleyMEMBER

    So now after a hard morning’s work, the RBA happy clappies can go to a well-earned lunch of caviar and Cristal champagne.

    • Thursday’s meeting will be about how they want to renovate their HQs in Martin Place.

      • happy valleyMEMBER

        Very true – $250m in stimulus will make all the difference. Just need to get the Chinese who built those Wuhan hospitals in 10 days to do the labour.

  7. Seriously, what’s the plan come June or August if they are blowing their wad in March when we have only 300 confirmed infections?

  8. I went to the National Sheepdog Trials on the weekend. Fabulous to watch those marvellous dogs and their humans at work.

    The mindless unthinking sheep being herded here and there by external actors made me think of the RBA.

  9. Can someone explain the mechanics of central banks buying govt bonds please. My understanding is as follows.
    1. Aust govt issues a bond to an investor – likely bank or super fund. The govt gets cash and the investor gets a coupon payment in return.
    2. The investor is now short on cash so the RBA buys the bond off the investor. The investor gets cash.
    3. What does the investor do with the cash? If it’s a bank, they hold onto it, if it’s a super fund they hold onto it.

    So what is the benefit of central banks buying govt bonds?

    • The central banks buy bonds in the secondary market to drive up the price and lower the yield. This liquidity finds its way into other assets and instruments via various routes.

      Repo is particularly powerful as the central bank never takes ownership of the government security it supposedly repurchases, it stays on the balance sheet of the entity and gives them a cash injection which can then be used ‘creatively’.

        • Yes it should. The central banks don’t care what they pay for the bonds.

          FWIW, some corporate credit is still going to be a problem unless the central banks expand what they can purchase. The RBA has never indicated interest in that but I get the feeling the Fed is itching to have that power.

          • Yes, it seems likely that the RBA will start buying up corporate debt as well to keep big corporates well supplied with credit to smash or takeover smaller competitors.

            That is all that this QE for Bankers amounts to. Supplying the Big End of town with cheap and easy credit so they can go on Viking raids and buy up industries lock stock and barrel and then use the market power to gouge like ,………Vikings.

            And every day we hear people begging for the RBA to do it too.

            Unbelievable.

          • So in reality it is corporate welfare with tax payers, via the central bank bailing out banks and corporates?

          • Correct.
            Those that profit from a privatised public monetary system cry for mama to protect their speculations at the first drops of rain.
            And they do so with the threat of destroying the monetary system they demand to control.

  10. How nice for bond owners!

    The RBA promises to maintain the high prices of bonds to keep the yields low.

    The owners of rental properties will be next in line though the RBA has been servicing them since the last Federal election with low interest rates to chum the schools of bait rate bait fish.

  11. House prices to the moon!
    Seriously though, I don’t know how this treats a viral infection.

    • darklydrawlMEMBER

      If they keep printing, you can likely use money in your wallet at some point. :-/

  12. DingwallMEMBER

    From SMH Markets live …………..Macquarie sees a death spiral and reset unless there is a coordinated response (ha good luck with that) …………. I see the crisis we had to have

    Macquarie Research issues dire warning
    By David Scutt
    If there is no coordinated action from global policymakers to combat the threat posed by the coronavirus outbreak, Macquarie Research believes the current market meltdown will get a whole lot worse.

    “The uncertainty of economic impact of COVID-19, collapse in the oil price and rising geopolitical pressures are aggravated by computerised trading and more than a decade of extreme monetary policies, which left investors marooned in overcrowded positions,” the investment bank wrote last Friday.

    “Unless this ‘death spiral’ is arrested, all assets – except extreme safety – will collapse, capital will freeze, and liquidity disappear. At that point our entire asset-based financialized world will reset.”

    “Funds will collapse, pensions won’t get paid and we will need to recognise that decades of growth were not sustainable, ultimately converging money supply and GDP, and in the process wiping out years of rising standards of living.”

    • Man… when mainstream analysts start going all Zerohedge… you start to think we might be nearing the bottom.

      Like I agree that this is terrible but Macquarie shouldn’t be waking up to that for a long time to come.