Weekly Market Recap
Asia Pacific
23/03/2020
Week in review
- RBA cuts rates to 0.25%, starts bond purchases
- BoE cuts rates 10bps, another GBP 200bn in QE
- ECB extends QE by EUR750bn
Week ahead
- Global PMI for manufacturing
- U.S. consumer confidence
- BoE policy meeting
Thought of the week
A bridge over troubled waters. The RBA embraced the unconventional last week announcing a multipronged package of rate cuts, low cost term funding for lenders and bond purchases to lower the cost of credit in the economy and address dislocations in the bond market as bond yields spiked due to liquidity concerns. There may have been some disappointment that there was no big bang number on bond purchases as was announced by the ECB or the BoE last week. However, the RBA’s resolve to ensure the smooth functioning of bond markets and buy an unlimited amount of bonds to achieve its target should not be underestimated. The cash rate is as low as it is going to go and will be there for some time, perhaps years.
Bonds' bad behaviour
Yield on Australian government bonds
Source:FactSet, J.P. Morgan Asset Management, all returns in local currency unless otherwise stated.
Equity price levels and returns: Levels are prices and returns represent total returns for stated period.
Bond yields and returns: Yields are yield to maturity for government bonds and yield to worst for corporate bonds. All returns represent total returns. AusBond Comp is the AusBond Composite 0+ Yr,AusBond IG is the AusBond Credit 0+ Yr both provided by Bloomberg.
Currencies: All cross rates are against the Australian dollar. An appreciation of the foreign currency against the Australian dollar would be positive and a depreciation of the foreign currency against the Australian dollar would be negative.