Back in March, during an emergency meeting, the RBA announced that rather than lowering interest rates any further, they would instead adopt a quantitative easing policy.

It’s been over a month since this policy has come into effect. Has it been functioning as intended?

As of the 21st of April, the RBA has purchased 47 billion dollars of government bonds from the secondary market, with the goal of lowering the yield on three-year bonds to 25 basis points. For reference, immediately prior to the RBA buying bonds, the yield was at 50 basis points.

The yield is currently sitting around 25 basis points, so it appears that their quantitative easing strategy is working as intended.

And the RBA is committed to doing whatever it takes to achieve this yield target. The Governor of the RBA, Mr. Phillip Lowe said, quote: “we will buy bonds in whatever quantity is required to achieve our goals.”

In the initial days after this policy came into effect, the RBA was purchasing four or five billion dollars worth of bonds each day. As market conditions approached the 25 basis point target, daily purchases averaged 750 million dollars.

By lowering the yield of Government bonds, the RBA is reducing the cost required for both the Government and private sector to raise debt, and ensuring that credit is available for those who need it. As a result, it is cheaper for Governments and firms to raise the funds required to deal with the exceptional circumstances they are currently facing.