Bold move as Reserve Bank turns to ‘quantitative easing’
Government bonds being bought in secondary market
As the Covid-19 crisis takes hold of SA, the Reserve Bank fired its own bazooka on Wednesday stepping into the secondary bond market to purchase government bonds with newly created money.
The government bond market has been unable to function normally for the past week, with yields spiking to record highs due to a shortage of buyers. This has dire implications for the cost of borrowing by the Treasury, which must raise an average of R1.1bn a day to fund the country’s borrowing requirements.