Australian Bond Exchange

ABX Weekly 25/03/2020

Market Update  


The global turmoil has continued over the past week with Central Banks and Governments unleashing an unprecedented wave of cash to stabilise the financial and banking system. Equity markets in particular had one of the biggest recovery bounces of alltime last night and government bond yields have started to normalise across the globindicating that the Central Bank interventions have started to show some signs of success. 

Our RBA step in last week with a decrease in official interest rates to a record low of 0.25% and they have started a much-needed QE program with the RBA stepping into the Government bond market as a buyer across the shorter end of the curve. It’s stated target yield on the 3-year Australian Government is around 0.25%. In addition, we have seen various Swap arrangements with the US Federal Reserve to further help to add liquidity to the system. 

This in turn should help the banking system to support the economy and we have seen massive decreases in interest rates across the board by the banks for various loans from corporate to home mortgages. 

The RBA stressed once again in their announcement that Australia’s financial system is resilient and well placed to deal with the effects of the coronavirus. The banking system is well capitalised and is in a strong liquidity position.