Australia central bank to buy up to $2.9 billion in first round of QE

By Swati Pandey

SYDNEY (Reuters) – Australia’s central bank plans to buy up to A$5 billion ($2.87 billion) in local government bonds on the first day of its bond buying program on Friday as it looks to cushion the economic shock from the coronavirus pandemic.

Following an out-of-schedule meeting on Thursday, the Reserve Bank of Australia (RBA) reduced its cash rate to an all-time low of 0.25% and said it would do “whatever is necessary” to keep yields on three-year government bonds low.

On Friday, the RBA offered to buy bonds with maturity between two years and eight years, maturing in July 2022, April 2023, November 2027 and May 2028.

Australia’s ten-year government bond yields were at 1.30% after the announcement, having fallen from a peak of 1.647% on Thursday. Yields on three-year bonds eased a touch to 0.32%, near the RBA’s newly set target of 0.25%.

Government bond futures rose, with the three-year bond contract rising 4 ticks at 99.70. The 10-year contract surged 19.5 ticks to 98.71.

The RBA’s stimulus comes as global central banks took unprecedented steps this week to backstop financial markets with trillions of dollars of liquidity, joining governments to help cushion the impact of the coronavirus.

Yet, the coordinated policy steps have largely failed to stem a rout in financial markets, with many fearing a deep worldwide recession and more haemorrhaging of investments.

(Reporting by Swati Pandey and Wayne Cole; Editing by Shri Navaratnam)