RBA Ready to Buy Government Bonds, Announce Steps Thursday
RBA Ready to Buy Government Bonds, to Announce Policy Thursday
(Bloomberg) -- Australia’s central bank said it’s prepared to purchase government bonds and will announce further policy steps Thursday to support the economy, just hours after the U.S. and New Zealand slashed interest rates.
“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,” Governor Philip Lowe said in a two-paragraph statement Monday.
Earlier Monday, the central bank said it will offer more and longer repurchase operations to ensure smooth functioning of credit markets after it injected a record A$8.8 billion ($5.4 billion) of liquidity Friday in its regular open market operations.
The central bank, which is running low on conventional ammunition, made the announcement after the Federal Reserve slashed U.S. interest rates to near zero and resumed its bond-buying program. The Reserve Bank of New Zealand cut its benchmark rate by 75 basis points Monday and pledged to hold rates there for at least a year.
The RBA and Australia’s government-funding arm “are in close liaison in monitoring market conditions and supporting continued functioning of the market,” Lowe said in his statement.
The central bank said earlier Monday it will conduct one-month and three-month repurchase operations “until further notice,” in a statement from the Council of Financial Regulators, the coordinating body for Australia’s main financial regulatory agencies. The RBA will also conduct repo operations of six-months maturity or longer at least weekly, “as long as market conditions warrant.”
Australia’s banking regulator is ensuring “institutions pre-position themselves to take advantage of the RBA’s supportive measures,” the statement said. “The council is meeting with major lenders later this week to discuss how they can best support households and businesses through this challenging period. The council will be emphasizing the importance of a continuing supply of credit, particularly to small businesses.”
Markets were in meltdown last week on investor fears of the mounting economic toll from the coronavirus outbreak and increasingly stringent measures taken by governments to stem the outbreak.
Victoria, Australia’s second most-populous state, declared a four-week state of emergency Monday, allowing the enforcement of 14-day isolation requirements for all travelers entering Australia and the cancellation of mass gatherings of more than 500 people.
Council members “remain in close contact with one another and with the Australian Government and their international peers,” the statement said. “The council will have its regular quarterly meeting on Friday 20 March at which the impact of COVID-19 on the financial system will be further discussed. The Council and the Australian Treasurer are also holding teleconferences at least weekly.”
To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net
To contact the editors responsible for this story: Paul Jackson at pjackson53@bloomberg.net, Victoria Batchelor, Michael S. Arnold
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