HomeContributorsFundamental AnalysisRBA Made First Purchases Under QE Program

RBA Made First Purchases Under QE Program

General Trend:

  • Shanghai Composite rises during morning session, banks rise as PBOC left rates unchanged
  • Japan markets are closed today for holiday
  • Kospi rises over 4% after declining by over 8% on Thursday; BOK and Fed announced FX swap agreement
  • Sectors moving higher in Australia include Energy and Financials
  • Aussie rises as RBA announced first bond purchases under QE program; Aussie bonds rise after volatility seen on Thursday’s session
  • RBA purchased the maximum of A$5.0B in bonds in first QE operation (purchased bonds due in 2022, 2023, 2027 and 2028)
  • USD/JPY drops amid holiday in Japan, Fed announced multiple currency swap agreements with central banks; California has issued statewide ‘shelter in place order’
  • PBOC unexpectedly left its loan prime rates unchanged [also left the 1-year MLF rate unchanged on March 16th]
  • PBOC fixed yuan reference rate at weakest level since March 2008
  • South Korea said to be considering measures for commercial paper market (press)

Headlines/Economic Data

Australia/New Zealand

  • ASX 200 opened +1.5%
  • (AU) Reserve Bank of Australia (RBA) purchases A$5.0B in 2-8-year bonds (1st bond buying operation)
  • (NZ) Reserve Bank of New Zealand (RBNZ): Offering NZ$2.0B in 3 or 6 month term loans to banks via the TAF Facility
  • (NZ) Reserve Bank of New Zealand (RBNZ) lends NZ$200M under prior announced NZ$2.0B TAF facility
  • (AU) Reserve Bank of Australia (RBA) adds A$4.25B to banking system through repos v A$12.7B prior
  • (NZ) Reserve Bank of New Zealand (RBNZ): committed to ensuring smooth market function; financial system remains sound
  • VAH.AU CEO Joyce: Nationalizing Virgin would create an unfair advantage in the sector and reward Virgin for previous mismanagement – Aussie press
  • (AU) Reserve Bank of Australia (RBA): Surplus cash at exchange settlement (ES) accounts at A$30.12B (record high) v ~A$18.8B prior
  • (AU) Australian Banking Association: Banks to defer loan repayments for 6-months for small business amid coronavirus; banks to alos consider emergency relief for mortgages
  • (AU) Australia Finance Ministry: To stop bond buybacks follow RBA announcement to buyback bonds (yesterday)
  • TLS.AU Guides FY20 Underlying EBITDA at bottom end of guidance; will not announce any further job cuts over the next 6 months
  • (AU) Reserve Bank of Australia (RBA) establishes $60B FX swap agreement with US Fed
  • (AU) Australia PM: Will not hand down budget until Oct 6th [delayed from May 12th], idea that you can put together forecast around economy at this time is not sensible
  • (NZ) Reserve Bank of New Zealand (RBNZ) Assistant Gov Hawkesby: we are already buying small amount of bonds to ease tension; RBNZ made it clear next stimulus tool is QE

Japan

  • Nikkei 225 opened closed for holiday
  • (JP) Japan Gov, ruling party and opposition all met yesterday to consider a “record breaking” stimulus package – Nikkei
  • 7751.JP Canon Medical to begin development of a rapid genetic test for COVID-19 in partnership with Nagasaki University
  • 9984.JP Said to be seeking $10B to shore up its vision fund, amid crisis – press

Korea

  • Kospi opened +2.8%
  • (KR) Bank of Korea (BOK): to immediately inject dollar liquidity to onshore markets using $60B bilateral currency swap with US
  • 005380.KR Hyundai and Kia Motors both halt production in US and Europe due to coronavirus
  • (KR) South Korea Feb PPI Y/Y: 0.7% v 1.1% prior
  • 005930.KR Due to travel restrictions imposed by Vietnam, production of the newest Galaxy Note smartphones may be negatively impacted – Nikkei
  • (KR) Bank of Korea (BOK) Gov Lee: Ready with all measures on the table; swap line with Feb expected to help stabilize FX markets
  • (KR) South Korea reports 84 additional coronavirus cases in the last 24-hours; Total 8,652
  • (KR) South Korea FSC: Banks have agreed to participate in KRW10T bond fund and will help expand it if needed
  • (KR) South Korea met with brokerage firms on commercial paper – local press

China/Hong Kong

  • Hang Seng opened +2.0%; Shanghai Composite opened +0.9%
  • (CN) CHINA PBOC SETS 1-YEAR LOAN PRIME RATE (LPR) AT 4.05% V 4.05% PRIOR (4.00%E); SETS 5-YEAR LPR AT 4.75% V 4.75% PRIOR (4.70%E)
  • (CN) PBoC adviser Ma Jun: Have relatively large room for further broad and targeted RRR cuts; Can ramp up open market operations if needed
  • (HK) Macau cuts 2020 gaming Rev outlook to MOP130B due to coronavirus – press
  • (CN) China National Health Commission Coronavirus Update for March 19th: 39 additional cases v 34 prior; Additional deaths: 3 v 8 prior; Hubei: 0 additional cases v 0 prior; additional deaths: 2 v 8 prior
  • 1.HK Reports FY19 (HK$) Net 39.8B v 39.0B y/y, Total Rev 439.9B v 453.2B y/y
  • (CN) China PBOC sets Yuan reference rate: 7.1052 v 7.0522 prior (weakest fix since March 2008)
  • (CN) China PBoC Open Market Operation (OMO): Skips reverse repo operations for the 23rd consecutive session, Net CNY0B v CNY0B prior

Other Asia

  • (TW) Taiwan Central Bank to stop guiding overnight rate at the open, to allow the market to set it

North America

  • (US) Sen McConnell coronavirus relief plan reportedly includes direct payments of $1,200 per person, $2,400 per couple
  • (US) US Treasury Sec Mnuchin: Goal is to get ‘bill’ passed and signed by Trump on Monday (March 23rd); Mnuchin and White House Adviser Kudlow are expected to meet with US Senators on Friday (March 20th) regarding stimulus
  • (US) Federal Reserve Board encouraged by increase in discount window borrowing to support the flow of credit to households and businesses
  • AAL Announces will operate cargo only flights to help keep business operating with currently grounded passenger plans between US and Europe
  • (US) NIH’s Fauci: There is no magic drug for coronavirus (reference to malaria drug that could be a possible treatment) – CNN
  • (US) FEDERAL RESERVE ESTABLISHES $30-60B DOLLAR SWAP LINES WITH ADDITIONAL CENTRAL BANKS
  • (US) California Gov has issued statewide shelter in place order
  • (US) President Trump said to have asked states to delay releasing jobless claims data – NYT
  • (US) Pres Trump: I will get involved in the oil market dispute at the appropriate time; Low oil prices are devastating to Russia

Europe

  • (ES) ECB’s De Guindos (Spain): ECB will prevent economic crisis from becoming financial crisis; ECB can always do more; reiterates European fiscal response is needed

TV interview

  • (ES) Spain government has ordered hotels and lodging establishments to close due to coronavirus – US financial press

Levels as of 1:20 ET

  • Nikkei 225, closed, ASX 200 +0.7%, Hang Seng +2.6%; Shanghai Composite +0.2%; Kospi +5%
  • Equity Futures: S&P500 +0.2%; Nasdaq100 +0.8%, Dax +1.5%; FTSE100 flat
  • EUR 1.0749-1.0652 ; JPY 111.36-109.98 ; AUD 0.5911-0.5662 ;NZD 0.5807-0.5608
  • Gold +0.3% at $1,484/oz; Crude Oil +3.7% at $26.85/brl; Copper -0.8% at $2.135/lb
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