This increased demand for Government bonds reduces their ‘yield’ interest rates.The investors – including banks – also receive a cash injection as they receive the proceeds from selling their Government bonds to the Reserve Bank.A lot of interest rates in the economy are calculated off the yield interest rates for Government bonds, meaning any move to reduce these rates will also flow through to those charged by banks for business lending and mortgages.This is in addition to the Reserve Bank’s independent decision cut to the Official Cash Rate (OCR) last week, which was focussed on bringing shorter-term interest rates down.Help interest.co.nz grow our coverage, independent as always. In respect of Friday's US Fed $500 billion 84 day RP operation, only $31.25 billion was bid and accepted. ""The response to the COVID-19 outbreak has escalated further in recent days, pointing to an even more severe impact on economic activity. means you'll see it being re-advertised by different owner the next month with more price on it, Don't miss this once in a life time opportunity! Fertile land, and guns.Edit: investments in breweries and distilleries might also make sense.Remember this investment advice comes from the internet, so at your own risk yada yada.Split it up, buy some gold, buy some NZ energy company shares, keep some in the bank, take some cash out now (as in physical currency under the bed, not much, a few thousand will do).
The greatest danger now is a full shift to centralised control, price controls, etc, which will send us into a depression.Isn't this the perfect time for the Govt to step in and buy bank stocks (in Australia anyway).
USD/JPY is back on the 106 levels, as the US dollar extends its recovery momentum into Asia, benefiting from the rebound in the US Treasury yields across the curve. The RBNZ left … $30 billion is equivalent to 10% of Gross Domestic Product (GDP).The RBNZ said the "negative economic implications of the coronavirus outbreak have continued to intensify" and its Monetary Policy Committee (MPC) agreed "further monetary stimulus is needed to meet its inflation and employment objectives".By buying Government bonds, the RBNZ increases demand for these bonds, which in turn reduces their yield interest rates.Because a number of the interest rates in the economy are calculated off the yield interest rates for Government bonds, a move to reduce these rates will enable retail banks to lower their mortgage and business lending rates.Investors (including retail banks) also receive a cash injection when they sell Government bonds to the RBNZ.The MPC saw the need to launch this bond buying programme because financial conditions tightened “unnecessarily” over the past week.“Heightened risk aversion has caused a rise in interest rates on long-term New Zealand government bonds and the cost of bank funding,” the MPC said.The MPC said depreciation in the exchange rate has “helped ease conditions at the margin but not sufficiently”.However measures put in place to restrict the spread of the virus - travel restrictions, mass gathering bans, etc - will add to inflation and employment falling below the RBNZ's targets in the near term.
It started last Sept with the increasing (now absolutely massive) injections into the US repo market.Agree. Heightened risk aversion has caused a rise in interest rates on long-term New Zealand government bonds and the cost of bank funding.The Committee has decided to implement a LSAP programme of New Zealand government bonds. The repo operations were already at unprecedented levels by the end of last year, anyone looking could see there was a massive issue brewing. On Saturday 21 March, following advice from the Reserve Bank’s financial markets team as to their operational and legal readiness to implement a LSAP, the MPC Chair called for an MPC decision to be made by email. And its not like shares, you can't just call the broker and its gone 5min later.Einstein.... “The definition of insanity is doing the same thing over and over again and expecting different results.”Oh you've got to be (expletive) kidding me. P.S. "This does not change our forecast of a 3.1% decline in GDP. Martin North interviews an aussie guy who has a flowchart on what happens next. But, because the RBNZ is part of the Crown’s balance sheet, it is necessary for an indemnity to be signed by the Minister of Finance.In addition, a Memorandum of Understanding has been created to establish a framework for this decision, and any future decisions on alternative monetary policy. Same idea in EU about banning short selling. But they don't care about the long term, they just want to make sure house prices stay up (because our entire economy is based on it). This needs to be wide open to the whole global system, inside and outside the US physical boundary.The Fed should be working with the Treasury to manufacture securities only with a determination this time. A program that is open to financial counterparties all around the world, almost like combining dollar swap lines with a Discount Window except where US T-bills are being offered rather than stupid, inert, useless bank reserves.Forget using Primary Dealers; they are part of the problem, in many ways the biggest problem piece. How has this been nice?No. Banks are similar to power companies, Air Nz - the Govt has to sit behind them, they may as well ensure the taxpayer benefits as they do.