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The Reserve Bank of New Zealand (RBNZ) has introduced a range of new measures to ensure the smooth functioning of financial markets. The measures, announced on 20 March, are aimed at keeping short-term interest rates low amidst the COVID-19 crisis.
The A$15 billion (US$8.5 billion) made available to the Australian Office of Financial Management (AOFM) to support bank and nonbank lenders via purchases of asset-backed securities could be enough to account for the bulk of the public securitisation market for the balance of 2020.
The Reserve Bank of Australia (RBA) took unprecedented action on 19 March to provide a “bridge” to an expected economic recovery after the COVID-19 crisis. RBA governor Philip Lowe expects the support package to be required for the foreseeable future but says he can see better times on the horizon.
The Reserve Bank of Australia announced measures on 19 March designed to support the economy. Along with the expected cut to the cash rate and QE – to be delivered in the form of yield-curve targeting – the RBA will roll out a term-funding facility for banks and additional funding for lending to SMEs alongside “a complementary programme of support for the nonbank financial sector, small lenders and the securitisation market”, which the Australian Office of Financial Management (AOFM) will deploy.
A stressed market in New Zealand is leading analysts to call for urgent intervention from the central bank. Hours ahead of an expected launch of QE in Australia, the suggestion is that the Reserve Bank of New Zealand (RBNZ) needs to follow suit to prevent further deterioration in local liquidity conditions.
Australia’s major banks are well prepared to support households and businesses as they come under increasing pressure from an economy stalled by COVID-19, analysts and funders say. Even as financial market liquidity becomes more challenged, federal government, central bank and regulatory positioning stands the banks in good stead.
Following an emergency meeting of its board, the Reserve Bank of New Zealand implemented an out-of-cycle 75-basis-point cash rate cut and signalled its next step would be to buy government bonds, if necessary. The central bank also delayed implementation of new capital standards for banks by 12 months.
Sustainability-linked loans (SLLs) continue to gain traction in Australia. Wesfarmers is the latest borrower to establish a facility linked to environmental and social goals, which it says are ambitious and will improve its overall credit profile.
The disruption the accelerating COVID-19 crisis has sparked will test the resilience of the Australian securitisation market, even though risks to credit quality may be limited. Issuers may have to increase their usage of alternative funding options should the public market remain inaccessible for an extended period.
The New Zealand dollar corporate market appears to have battened down the hatches as COVID-19 has impinged on global markets. The specifics of local demand have shielded New Zealand from global volatility on occasion but market participants say the low-rate environment now leaves it more vulnerable to global moves.
As high-grade bonds have rallied globally in response to the COVID-19 crisis, opportunities have emerged in the short end of the Australian dollar basis swap curve.
The Reserve Bank of New Zealand (RBNZ) has released a paper on the principles that would guide its potential use of unconventional monetary policy tools. There is no specific guidance on how the central bank might combat fallout from COVID-19.