$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

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

RBA may need $30b in bonds for a shot at QE, says Deutsche Bank

Original article by Matthew Cranston
The Australian Financial Review – Page: 4 : 10-Mar-20

Deutsche Bank economist Phil O’Donaghoe does not expect quantitative easing to be necessary in response to the coronavirus. He says another official interest rate cut in April and the federal government’s stimulus package should result in a 2019-20 Budget deficit of about 1.2 per cent of GDP. However, O’Donaghoe warns that if the Reserve Bank of Australia does resort to quantitative easing, it would need to purchase up to $30bn worth of bonds to generate the same macroeconomic stimulus as a rate cut of 25 basis points.

CORPORATES
RESERVE BANK OF AUSTRALIA, DEUTSCHE BANK AG

Lower rates won’t help: AFIC boss

Original article by Cliona O’Dowd
The Australian – Page: 17 & 28 : 3-Mar-20

The Australian Financial Investment Company’s MD Mark Freeman argues that official interest rates are already at a historically low level, so further monetary policy easing is unlikely to stimulate the economy or stabilise financial markets. The Reserve Bank is widely tipped to reduce the cash rate on 3 March, and there is growing speculation that it could pursue quantitative easing later in the year. However, Freeman has questioned the merits of quantitative easing. He adds that the sharemarket’s recent pullback has created some good buying opportunities.

CORPORATES
AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED – ASX AFI, RESERVE BANK OF AUSTRALIA

$A catches coronavirus, plummets to 11-year low

Original article by Tom Richardson
The Australian Financial Review – Page: 27 : 3-Mar-20

The Australian dollar reached a low of $US0.654 in local trading on 2 March, ahead of the Reserve Bank of Australia’s monthly board meeting. Financial markets have priced in a near-97 per cent chance that the central bank will reduce the cash rate on 3 March, and a 67 per cent chance of a second rate cut in May. Morgan Stanley expects the cash rate to remain on hold until April, giving the RBA time to assess GDP data to be released on 4 March. The Commonwealth Bank says the economic impact of the coronavirus could prompt the Australian dollar to fall further in coming days.

CORPORATES
RESERVE BANK OF AUSTRALIA, MORGAN STANLEY AUSTRALIA LIMITED, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA

Rate cut tipped amid virus crisis

Original article by Richard Gluyas
The Australian – Page: 17 & 20 : 2-Mar-20

Financial markets have now priced in an 87 per cent chance that the Reserve Bank of Australia will reduce the cash rate on 3 March. This compares with an 18 per cent chance on 28 February. The case for further easing of monetary has been strengthened by the local sharemarket’s 9.8 per fall in the last week of February, amid global bearish sentiment as the coronavirus outbreak continued to spread beyond China. Shane Oliver of AMP Capital says the RBA would probably have preferred to wait a bit longer to act. Federal Reserve chairman Jerome Powell has also flagged the possibility of interest rate cuts to stimulate the US economy.

CORPORATES
RESERVE BANK OF AUSTRALIA, AMP CAPITAL INVESTORS LIMITED, UNITED STATES. FEDERAL RESERVE BOARD