Fed takes a keen interest in RBA’s bond buying

Original article by Sarah Turner
The Australian Financial Review – Page: 27 : 18-Jun-20

The yield on three-year Australian government bonds has traded within a narrow range of 0.21 per cent to 0.28 per cent since March, when the Reserve Bank commenced a targeted bond-buying program aimed at keeping the yield at around 0.25 per cent. The success of yield curve control in Australia has prompted the US Federal Reserve to assess the strategy, although Stephen Halmarick from the Commonwealth Bank says it is unlikely to adopt this in the near-term. The Federal Reserve’s focus has been on buying a certain amount of bonds each month.

CORPORATES
RESERVE BANK OF AUSTRALIA, UNITED STATES. FEDERAL RESERVE BOARD, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA

Fed to hold interest rates near zero at least till 2022

Original article by Nick Timiraos
The Australian – Page: 17 : 12-Jun-20

The US Federal Reserve has left interest rates on hold after its latest two-day policy meeting, and chairman Jerome Powell has indicated that a rate rise will not be on the agenda for some time. Federal Reserve officials unanimously agreed that the cash rate is likely to remain at around zero in 2021, and the majority expect no change in monetary policy during 2022. Meanwhile, the central bank intends to continue purchasing Treasurys and mortgage securities at the current rate, while Powell says the US labour market is unlikely to rebound from the coronavirus quickly, despite recent data showing that the economy added 2.5 million jobs in May.

CORPORATES
UNITED STATES. FEDERAL RESERVE BOARD

Powell’s equities lift: we’re not out of ammo

Original article by David Rogers
The Australian – Page: 20 : 19-May-20

The Australian sharemarket has been bolstered by encouraging comments from US Federal Reserve chairman Jerome Powell. He indicated that there is "almost no limit" to the central bank’s monetary stimulus in response to the coronavirus pandemic; Powell has also forecast that the US economy will steadily recover during the second half of 2020, in the absence of a second wave of virus infections. The Federal Reserve’s balance sheet has increased by 67 per cent to $US6.93trn since February, although the central bank has been winding back its quantitative easing program since mid-March.

CORPORATES
UNITED STATES. FEDERAL RESERVE BOARD, STANDARD AND POOR’S ASX 200 INDEX

$A doing its job to help stabilise the economy

Original article by Sarah Turner, Jonathan Shapiro
The Australian Financial Review – Page: 31 : 22-Apr-20

The Reserve Bank of Australia has bought $47bn worth of federal and state government bonds since 20 March. The central bank has progressively reduced its daily bond purchases from $5bn to just $500m since then, and it will now buy federal government bonds three times a week and state bonds just once a week. Meanwhile, RBA governor Philip Lowe says the Australian dollar fell more sharply than he had expected in March. It reached a low of $US0.5741 and has since recovered to around $US0.63. Lowe says the currency has been a "great shock-absorber" for the domestic economy over the last three decades.

CORPORATES
RESERVE BANK OF AUSTRALIA

No sign of breakout in inflation: King

Original article by Adam Creighton
The Australian – Page: 13 & 16 : 20-Apr-20

The Reserve Bank of Australia has been actively buying state and federal government bonds in response to the coronavirus crisis. Former Bank of England governor Mervin King contends that the risk of a sharp rise in inflation will remain low if central banks rather than governments continue to have responsibility for deciding how much money to print. King has also described modern monetary theory as "nonsense", while he has praised regulators in Australia, the UK and New Zealand for advising banks to delay their dividend payments.

CORPORATES
RESERVE BANK OF AUSTRALIA, BANK OF ENGLAND

Reserve Bank now important bond player

Original article by Sarah Turner
The Australian Financial Review – Page: 31 : 15-Apr-20

Su-Lin Ong of RBC Capital Markets says the federal government has issued some $48bn worth of bonds so far in 2019-20. She estimates that the Reserve Bank of Australia has bought about $36bn worth of these government bonds in the last three weeks, as part of its quantitative easing program. Westpac’s Damien McColough notes that the central bank has emerged as one of the largest bond fund managers in the local market. Meanwhile, Ong says government bond issuance for 2019-20 could potentially top $160bn.

CORPORATES
RBC CAPITAL MARKETS, RESERVE BANK OF AUSTRALIA, WESTPAC BANKING CORPORATION – ASX WBC

Prepare to be hit but we’ll ease blow: RBA

Original article by Adam Creighton
The Australian – Page: 4 : 8-Apr-20

Reserve Bank of Australia governor Philip Lowe has indicated that the cash rate will remain at 0.25 per cent until inflation returns to its target range of 2-3 per cent and the unemployment rate falls to around 4.5 per cent. The central bank will also maintain its bond-buying program until these targets are achieved. Lowe has warned that the domestic economy faces a "very large economic contraction" due to the coronavirus, while he says the unemployment rate will rise to its highest level in many years. The RBA left the cash rate on hold at its April board meeting.

CORPORATES
RESERVE BANK OF AUSTRALIA

Reserve Bank likely to slow bond buying

Original article by Jonathan Shapiro
The Australian Financial Review – Page: 30 : 7-Apr-20

The Reserve Bank of Australia’s quantitative easing program commenced on 20 March, and the central bank initially began purchasing $5bn worth of commonwealth government bonds per day. It has bought some $31bn of such bonds to date, including $10bn in the week ended 3 April. The RBA has been gradually been winding back its bond buying, and Damien McColough of Westpac says that even if its current momentum is maintained it would hold about $80bn worth of government bonds by the end of June. This would constitute about 30 per cent of the government bonds on issue. The RBA has also bought some $5bn worth of state government bonds.

CORPORATES
RESERVE BANK OF AUSTRALIA, WESTPAC BANKING CORPORATION – ASX WBC

$105b bridge across the chasm

Original article by Matthew Cranston, James Eyers, James Frost, Jonathan Shapiro
The Australian Financial Review – Page: 1 & 4 : 20-Mar-20

Reserve Bank of Australia governor Philip Lowe has warned that the cash rate is likely to remain at the new record low of 0.25 per cent for three years. The emergency interest rate cut on 19 March is the RBA’s first out-of-cycle move since 1997; it has coincided with the announcement of a government bond-buying program which aims to ensure that the benchmark three-year bond yield remains at around 0.25 per cent. Lowe says there will be no limit to the bond-buying program. The RBA has also announced a $90bn line of credit for banks to provide low-interest loans to small and medium enterprises; the federal government will provide an additional $15bn to small lenders to help with their funding.

CORPORATES
RESERVE BANK OF AUSTRALIA

Economic dose of medicine

Original article by Patrick Commins
The Australian Financial Review – Page: 1 & 4 : 17-Mar-20

The Reserve Bank of Australia is set to make an emergency interest rate cut in response to the coronavirus pandemic. RBA governor Philip Lowe has also flagged a government bond purchasing program to ensure that financial markets continue to function smoothly. The central bank injected some $5.9bn into the banking system on 16 March in order to boost liquidity. The US Federal Reserve and the Reserve Bank of New Zealand announced out-of-cycle interest rate cuts on 16 March; US rates have been reduced to near zero and NZ rates have been slashed by 75 basis points to just 0.25 per cent.

CORPORATES
RESERVE BANK OF AUSTRALIA, UNITED STATES. FEDERAL RESERVE BOARD, RESERVE BANK OF NEW ZEALAND