ABX Weekly 29/04/2020

Market Update  

Global markets continue to recover from the March lows what appears to be the peak of the Corona pandemic which is helping to calm down volatility. Central bankers around the world have managed to stabilise the markets with their massive and unprecedented injection of cash into the system. The US Fed continues to slow its daily intervention and is now down to US$ 10bn worth of bonds per day down from $30bn just a couple of weeks ago.

In our time zone, the Bank of Japan maintained its interest rate on excess reserves but increased its purchases of corporate bonds. Japan’s central bank expects the country’s GDP to contract 3.0% to 5.0% in 2020.

China, with its industrial profits down over 35% for the year to date, is expected to announce additional stimulus measures in May.

Our RBA is also tapering of slowly its bond market buying and the Government bond yields have shown very little volatility over the past couple of weeks. In its recent statement it commented that they are committed to fix the 3-year bond yield at 0.25% which should boost confidence for the flow of money through the banking system. In a recent speech the RBA Governor has highlighted that the current crisis should be a great opportunity to finally work on some much-needed structural changes in the Australian economy which should position us well for the future.

The corporate refinancing cycle continues to go well with capital markets open for business helping to boost balance sheets across the board which is in stark contrast to the GFC crisis 10 years ago. Nab started yesterday with the profit reporting for the big banks and shareholders got a double whammy with a massive cut in dividends and a substantial $3.5bn capital raising.