Weekly Market Recap
Asia Pacific
30/03/2020
Week in review
- Eurozone PMI services plunges to record low of 28.4
- U.S. unemployment claims surge to 3.3m
- U.S. government passes $2tn fiscal stimulus package
Week ahead
- China PMI for manufacturing
- U.S. nonfarm payrolls
- Australia retail sales
Thought of the week
One week into the RBA’s bond buying scheme and the pace has been fairly steady. Over the first four days the RBA has been purchasing on average $3.75bn in federal and state level debt. The majority, 87%, has been in government debt with only a smattering in state level financing. This may not sound like a lot, but if the RBA keeps buying an average of $4bn per trading day this would equate to approximately $80bn per month, or roughly 10% of outstanding government and semi-government bonds. While the program is unlimited and open ended, the bond market is already showing early signs of returning to normal and the pace and frequency of RBA intervention may slow. Especially if the 3 year yield stays close tothe0.25%targetdue tomarket forces. Steady as she goes on bond RBA bond purchases Daily long-dated open market operations .
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.