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Australia Australia's RBA tries to calm bond rout with surprise buying

03:33  26 february  2021
03:33  26 february  2021 Source:   reuters.com

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The Reserve Bank of Australia bought A billion ( billion) of bonds Thursday, matching the record last March when it began quantitative easing. That eventually brought the targeted three-year yield down, but only after it hit a two-month high. A selloff that began in New Zealand also widened to In Australia , skepticism has grown that the RBA will maintain its guidance to keep borrowing costs steady into 2024. That’ s been highlighted by the unraveling of a popular trade based on selling April 2024 bonds and buying November 2024 notes in anticipation that the central bank’ s target will shift to the

Australia ’ s central bank cut interest rates and announced purchases of longer-dated bonds to complement its yield curve control program for shorter-length maturities as it seeks to drive a rapid economic recovery. The new bond buying program will involve securities issued by the federal government and states and territories at an expected 80:20 split. The RBA also cut the rate paid to commercial lenders for their deposits at the central bank to zero. In his speech, the governor estimated that once additional bond purchases are completed, the RBA ’s balance sheet will have nearly tripled

By Wayne Cole

a bird standing in front of a building: FILE PHOTO: An ibis bird perches next to the Reserve Bank of Australia headquarters in central Sydney © Reuters/DANIEL MUNOZ FILE PHOTO: An ibis bird perches next to the Reserve Bank of Australia headquarters in central Sydney

SYDNEY (Reuters) - Australia's central bank on Friday launched an unscheduled offer to buy three-year government bonds as a rout in global markets sent yields further above its 0.1% target.

In a surprise move the Reserve Bank of Australia (RBA) offered to buy A$3 billion ($2.35 billion) of the April 2023 to April 24 bond lines, on top of a similar amount on Thursday.

Yet the offer had scant impact in markets, where bonds were taking a hammering amid expectations of faster global growth and inflation.

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The Reserve Bank of Australia ’ s new quantitative easing program is set to close in on the Federal Reserve’s when measured against the size of the economy, highlighting the scale of its latest stimulus effort. Su-Lin Ong, head of Australian economic and fixed-income strategy at the Royal Bank of Canada, estimates that after accounting for RBA purchases, net issuance of Commonwealth and state government bonds available to private sector buyers could move into negative territory over the next six months.

Australia ’ s central bank is expected to cut interest rates to a fresh record low, reduce its three-year yield target and unleash further bond buying as it tries to turbo-charge a recovery now that the country is released from lockdown. “The recovery is unlikely to be robust enough to achieve the RBA ’s policy goals,” said James McIntyre, Australia economist at Bloomberg Economics. “With a sluggish demand outlook and a weak labor market justifying further policy support, it’s difficult for the RBA to make a case to hold back.”

Yields on cash three-year bonds were up at 0.15%, restrained in part because the RBA now owns a large part of that entire bond line. However, the implied yield on three-year bond futures, which are far more liquid, had shot to 0.35%.

Futures for 10-year bonds sank 12 ticks to 98.1550, lows last seen during the market mayhem of last March. That left them down a huge 41 ticks for the week, the steepest fall since 2001.

Yields on 10-year paper shot up to 1.847%, levels not seen since April 2019 and an increase of 45 basis points for the week so far.

($1 = 1.2749 Australian dollars)

(Reporting by Wayne Cole; Editing by Shri Navaratnam)

Australian $ retreats as RBA reaffirms easy policy, ramps up bond buying .
Australian $ retreats as RBA reaffirms easy policy, ramps up bond buyingSYDNEY (Reuters) - The Australian dollar eased on Tuesday as the central bank sought to calm nervous bond markets by recommitting a pledge to keep buying bonds, and reassuring that faster growth will not lead to an early tightening cycle.

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