Wednesday, 18 March 2020

Reserve Bank of Australia dumps emergency $14.7 billion into banking system and states intention to buy up Morrison Government debt, as financial system is stressed by COVID-19 pandemic

Reserve Bank of Australia, media release, 16 March 2020:

Statement by Philip Lowe, Governor

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 Council of Financial Regulators' (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. 

Channel 9 News, 16 March 2020:

The Reserve Bank has pumped extra liquidity into the banking system, part of a package of measures aimed at ensuring business and households have access to credit as the coronavirus causes chaos in global financial markets.
The RBA used its daily money market operation to add $5.9 billion to the system through regular repurchase agreements, well above its original intention of $2.5 billion.
That followed an injection of $8.8 billion on Friday, which had left commercial banks with a hefty $10.7 billion of surplus cash held at the RBA.....

No comments: