The Day at a Glance | March 19 2020

FED makes SWAP lines available for 9 new central banks

In order to reduce the global economy`s great demand for dollars in recent weeks the Federal Reserve announced the establishment of temporary SWAP lines to ensure liquidity. These new lines include $60 billion dollars for central banks in Australia, Brazil, South Korea, Mexico, Singapore and Sweden; and up to $30 billion for Denmark, Norway and New Zealand. These lines will be available for at least 6 months. SWAPS will allow central banks to offer dollars in their economies, solving liquidity issues that have come up due to high risk aversion in markets.

ECB announces purchasing program

Yesterday afternoon, the European Central Bank announced a new, €700 billion euro asset purchasing program to avoid financial problems due to the pandemic. The purchases will be carried out throughout 2020, increasing the total to €1.1 trillion (the largest amount ever seen). Christine Lagarde, President of the ECB, assured the bank will do what`s necessary in order to avoid financial problems in the block and that the bank`s commitment has no limits. The purchases will include government debt assets (including Greek debt) as well as private debt assets, and will extend to commercial papers. The program will conclude once the ECB considers the emergency has come to an end, but will not be before the end of 2020.

Australia and Japan reaffirm monetary stimulus

Australia`s Central Bank cut interest rates for the second time this month (to 0.25%), and for the first time in history started a quantitative easing program, as it announced it will purchase 3-year government debt in order to maintain these instruments` yields at 0.25%. In Japan, the country`s central bank announced purchases of additional ¥1.3 trillion ($12 billion dollars) of government debt and up to ¥4 trillion in ETF`s. The central bank reaffirmed its commitment to maintain stability in its local financial system.