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Covid Global Policy Update 20th March

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  • Covid Global Policy Update 20th March

    Mar 3 - The Fed cut rates by 50 bps. Fed to use its tools on hand, including CPFF and TALF as well as increase in asset purchases.



    Mar 12 - The Fed announced $1.5 tn repo operations.



    Mar 16 - The Fed cut rates by 100 bp to the zero lower bound and announced QE of at least $700bn, and cut the discount window primary rate by 150 bp, the required reserve ratio by 10 pt, and the extended discount window borrowing to up to 90 days on March 15.



    Also, it opened up swap lines with European Central Bank, Bank of Japan, Bank of England, Bank of Canada and Swiss National Bank in greater size and lower rate to help US dollar funding.



    Mar 17: Established a Primary Dealer Credit Facility, or PDCF. The facility allows primary dealers to support smooth market functioning and facilitate the availability of credit to businesses and households. The PDCF will offer overnight and term funding with maturities up to 90 days and will be available on March 20, 2020. It will be in place for at least six months and may be extended as conditions warrant.



    Mar 17: Established a Commercial Paper Funding Facility (CPFF) to support the flow of credit to households and businesses.



    Mar 17: Encouraged banks to support households and businesses by using their capital and liquidity buffers.



    Mar 18: Broadened its program of support for the flow of credit to households and businesses by taking steps to enhance the liquidity and functioning of crucial money markets by establishing a Money Market Mutual Fund Liquidity Facility (MMLF)1.



    [1] Through MMLF, the Federal Reserve Bank of Boston will make loans available to eligible financial institutions secured by high-quality assets purchased by the financial institution from money market mutual funds.



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    [1] Through MMLF, the Federal Reserve Bank of Boston will make loans available to eligible financial institutions secured by high-quality assets purchased by the financial institution from money market mutual funds.

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    Euro area



    Mar 12 - The ECB announced the following measures:



    1) New temporary Long Term Repo operations (LTROs) to bridge funding gaps to June;

    2) More favourable terms on Targeted Long Term Refinancing Options (TLTRO) III from June with expanded eligibility and a funding rate as low as 25bp below depo;

    3) Additional QE of €120 bn.



    Mar 18: ECB announces €750 billion Pandemic Emergency Purchase Programme (PEPP) which will include the following measures:



    1) Launch a new temporary asset purchase programme of private and public sector securities. Purchases will be conducted until the end of 2020.

    2) Expand the range of eligible assets under the corporate sector purchase programme (CSPP) to non-financial commercial paper, making all commercial papers of sufficient credit quality eligible for purchase under CSPP.

    3) Ease the collateral standards by adjusting the main risk parameters of the collateral framework. In particular, ECB will expand the scope of Additional Credit Claims (ACC) to include claims related to the financing of the corporate sector.



    Japan



    Mar 16 - The BoJ announced:



    1) More proactive purchase of ETFs and J-REITs at annual paces with the upper limit of around ¥12trn and about ¥180bn, respectively;

    2) Increase the purchase of Commercial Paper (CP) and corporate bonds through end-Sep 2020;

    3) Special lending facility to facilitate corporate financing at 0%;

    4) Further ample supply of funds.



    UK



    Mar 11: The BoE announced:

    1) Policy rate cut by 50 bps;

    2) Cut of counter cyclical capital buffer (CCyB) to 0%;

    3) New Term Funding Scheme (TFS) with additional incentives for SMEs.



    Mar 17: Announced a Covid Corporate Financing Facility (CCFF) to provide additional help to firms to bridge through Covid 19-related disruption to their cash flows.



    China



    Feb 3 - The People’s Bank of China (PBOC) cut 7- and 14-day reverse repo rates by 10 bp.



    Feb 7 - The PBOC provided RMB300 bn special re-lending to commercial banks.



    Feb 17 - The PBOC cut the 1-year medium-term lending facility (MLF) rate by 10 bp.



    Feb 20 - The PBOC cut the 1-year and 5-year loan prime rate (LPR) by 10 bps and 5 bps, respectively.



    Feb 25 - The PBOC increased the re-lending and re-discount quota by RMB 500 bn; policy bank lending of RMB 350 bn.



    Mar 13 - The PBOC announced a 50-100 bps cut in the required reserve ratio (RRR) for banks meeting inclusive financing standard, and another 100bps cut for qualified joint-stock banks.



    Mar 15 - The PBOC pledged to lower loan costs for firms with measures including: 1) Using monetary tools to ensure reasonably ample liquidity; 2) Continued Loan Prime Rate (LPR) reforms to enhance monetary policy pass-through; and (3) Leveraging the deposit benchmark rate.



    Russia



    Feb 7 - The CBR cut the policy rate by 25bps



    Korea



    Mar 16 – Bank of Korea cut policy rates by 50 bps



    Canada



    Mar 4 - The BoC cut the policy rate by 50 bps.



    Mar 12: Broadened the scope of the Government of Canada bond buyback program to add market liquidity and support price discovery.



    Mar 12: The Bank also committed to proactively support interbank funding by temporarily adding new Term Repo operations with terms of 6 and 12 months, in addition to its regular 1-month and 3-month Term Repo operations.



    Mar 13 - The BoC cut the policy rate by another 50 bps.



    Mar 13: BoC announced a new Bankers’ Acceptance Purchase Facility. This will support a key funding market for small- and medium-size businesses at a time when they may have increased funding needs and credit conditions are tightening.



    Mar 18: BoC to launch a new Standing Term Liquidity Facility, which will be focused on individual financial institutions rather than the market as a whole.



    Mar 18: BoC broadened the scope of the Government of Canada bond buyback program, added new term repo operations, and introduced a new Bankers’ Acceptance Purchase Facility that starts next Monday (March 23).



    Australia



    Mar 3 – Reserve Bank of Australia (RBA) cut rates by 25 bp.



    Mar 16 - RBA would be supporting market liquidity, through 1) Standing ready to buy government bonds in the secondary market; and 2) Expanding its open market operations by increasing the term and volume of its repo operations.



    Mar 19: RBA cut rates further by 25 bps to stand at 0.25%



    Mar 19: The RBA also announced a target for the yield on the three-year government bond at around 0.25%, which will complement the existing risk-free interest rate.



    Mar 19: Establish a facility to offer three-year term funding facility (TTF) to authorised deposit-taking institutions (ADIs).



    Mar 19: Exchange settlement balances at the Reserve Bank will be remunerated at 10 basis points, rather than zero as would have been the case under the previous arrangements.



    Mar 19: The Reserve Bank will also continue to provide liquidity to Australian financial markets by conducting one-month and three-month repo operations in its daily market operations until further notice. In addition, the Bank will conduct longer-term repo operations of six-month maturity or longer at least weekly, as long as market conditions warrant.



    Indonesia



    Feb 20 - Bank of Indonesia cut rates by 25 bps



    Turkey



    Mar 17: The CBT cut policy rate by 100 bps.



    Brazil



    Feb 5 - The BCB cut the policy rate by 25 bps



    New Zealand



    Mar 16 - The Official Cash Rate (OCR) is 0.25% reduced from 1.0% and will remain at this level for at least the next 12 months.



    Mar 16 - Bank has decided to delay the start date of increased capital requirements for banks by 12 months - to 1 July 2021.





    FISCAL MEASURES



    US



    Mar 6: President Trump signed into law an $8.3 billion bill for fighting the coronavirus outbreak, funding efforts to develop a vaccine and assisting local and state governments’ responses.



    Mar 11: - The United States will give individuals, and small and mid-sized businesses a three-month tax holiday to try to fight the economic impact of the novel coronavirus and give affected companies USD50bn more in low interest loans.



    Mar 14: President Trump declared national emergency, freeing up USD 50 bn government funding.



    Mar 18: (Under consideration) US$ 1 trillion stimulus package to help households and businesses, including US$ 500 billion direct payments in two tranches, US$50 billion in assistance for the airline industry, and up to US$ 500 billion to boost small business and for other needs.

    (Under consideration) US$45.8 billion supplemental funding request to the Department of Health and Human Services, the Veterans Administration (VA) and the Defense Department



    Mar 18: Congress passed a US$100 billion package guaranteeing free coronavirus testing for all Americans as well as an expansion of paid sick days for a subset of workers. It also focused on providing more paid sick days to certain workers, and giving states a funding boost for unemployment insurance and food assistance.



























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