RBA pumped billions to fix yields; risk-assets pared losses

1 min read | March 13, 2020 05:20 PM AEDT | By Team Kalkine Media

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In a dramatic turnaround today, equity markets snapped losing streak after the benchmark indices recovered as the closing bell approached. Although the S&P/ASX 200 closed up by 4.42% or 234.7 points at 5,539.3 points, it has recovered from the substantial lows made during the early hours of Friday trading session.

Policymakers have not labelled the operations as ‘Quantitative Easing’, but it is something similar. The US Fed and ECB have termed operations as asset purchases or large-scale asset purchases, which means buying bonds in bond markets, thereby injecting cash or liquidity.

Today, the yields on the AU bonds having maturities of 2-year, 5-year and 10-year saw moves of +11 bps, +14 bps and +19 bps, respectively - indicating that the market has seen a drastic sell-off in the AU bonds, such that, the RBA had to start buying in an effort to stabilise money outflow.

Movement on the long end of the curve (AU 15-year bond) was +26bps. Several media houses are noting that the RBA has injected over $6 billion in the repo markets, which bodes well given that today is Friday, meaning three-day interest accruals.

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