Disruptions to financial markets continued last week. Central banks have responded with emergency rate cuts and further measures to ease financial conditions. The RBNZ cut rates by 75bps to +0.25% and the US Federal Reserve cut rates by 100bps to 0-0.25% ahead of its scheduled meeting this week.
The US Fed announced a range of further significant policy easing measures on 15 Mar (details included in this briefing document), including the coordinated Central Bank action to “enhance the provision of liquidity via the standing US dollar swap line arrangements”.
The Bank of Japan announced a range of easing measures ahead of its scheduled meeting; details; https://www.boj.or.jp/en/announcements/release_2020/k200316b.pdf, https://www.boj.or.jp/en/announcements/release_2020/rel200316d.pdf, https://www.boj.or.jp/en/announcements/index.htm/
Although the RBA cut its benchmark rate two weeks ago, further liquidity measures were announced today (16 Mar) – https://www.rba.gov.au/media-releases/2020/mr-20-07.html. This includes the purchase of AU bonds in the secondary market and standing repo operations. The statement indicates that further policy measures will be announced during the week on 19 Mar. This is likely to include a further reduction in the overnight cash rate to 0.25% and possible details of a QE program. The Aus government has also indicated that further fiscal stimulus is to be announced shortly.
Data out of China early this week indicates significant declines across retail sales, industrial production and fixed asset investment over the Jan-Feb period.
Data of note this week; US retail sales (Feb), regional manufacturing data (Mar) and US industrial production – we will include a special focus on US initial jobless claims and weekly mortgage applications data.
Labour market reports from Aus and the UK will also be in focus this week.
The supply of US Treasuries settling this week will be heavier. The US Treasury will settle approx. $246bn in ST Bills, Notes and Bonds this week, raising approx. $57.3bn in new money.
This will be supported with significant increases in repo operations each week, as well as purchases of Treasury securities by the Fed. At this stage, there has been no forward schedule released for the planned purchases of securities. Purchase details this will be released daily on the NY Fed website. On Mon 16 Mar, the Desk at the NY Fed will purchase approx. $40bn in Treasuries. On 13 Mar, the Desk at the NY Fed purchased approx. $37bn in securities.
More detail, including a one-page calendar of key data releases for the week, is provided in the briefing document – download the file here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
