RBA’s Kent: Ready to buy bonds if needed to maintain 0.25% yield target

Australia's central bank is ready to buy government bonds if market conditions deteriorate significantly, or if needed to achieve its target for the 3-year yield of around 25 basis points, a senior official said on Monday, Reuters reports.

Reserve Bank of Australia's Kent was speaking at a Kanga News webinar on the topic "The Reserve Bank's Operations – Liquidity, Market Function And Funding."

key notes

  • RBA's pandemic liquidity operations 'have worked well.
  • Firms been able to issue bonds at good quantities, yields.
  • Spreads are aided by monetary, fiscal, prudential support.
  • Operations helped market sentiment, financial conditions.
  • Major banks have access to ample sources of funding.
  • Credit growth likely to remain low or even decline.
  • Current take up of the RBA's Term Funding Facility is around A$26 billion (around 17% of the total currently on offer), "our expectation and liaison with the banks suggest that the take-up of the TFF will ramp up as we get closer to the end of September" when it comes to an end.

The Reserve Bank of Australia (RBA) had slashed interest rates to an all-time low of 0.25% and launched an "unlimited" bond buying programme in an emergency meeting in mid-March to battle the coronavirus crisis. 

Since late April, the RBA has scaled back purchases significantly and has not needed to buy any bonds for some time, Assistant Governor Chris Kent said in a speech.

AUD/USD update

  • AUD/USD bearish gap is filled in as bulls step in ahead of a week thwart with risks. 
  • COVID-19, US/Sino and general economic risks are set to give the bulls a difficult time staying on top.

AUD/USD opened in a bearish gap within a 19 pip range at the start of business of the final week of July. 

The price at the time of writing is trading at 0.7096 within a 0.7082/1 range on the session so far. 

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