The Reserve Bank of Australia (RBA) expects a volatile bond market amid a constantly changing global economy and has implemented a fresh monetary policy framework to ensure liquidity and market stability, David Jacobs, head of domestic markets at the RBA, said in a speech on Thursday.
Referring to events that happened in April, when US President Donald Trump announced sweeping tariffs, Jacobs said the central bank is preparing itself for "periods of volatility and market disruption."
Jacobs said that Australia's bond market has matured "significantly" over the last 25 years, but is now facing new challenges from rising global bond supply and potential market volatility.
Australia's bond market has grown steadily from a declining sector to one roughly 80% the size of total bank credit, supported by increased onshore issuance, diverse investor participation, and a strengthening repo market, he added.
Rising global bond supply and heightened volatility have pushed yields and term premiums higher, but Australia's strong institutions and low debt continue to anchor investor confidence, Jacobs said.
To safeguard liquidity and stability, the RBA has introduced a new framework focused on full allotment repo operations and measured market engagement, ensuring ample reserves while supporting private money markets and reinforcing bond market resilience amid global uncertainty, Jacobs added.
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