Legislative Council Thursday 4 June, 2020
Ms FORREST question to LEADER of the GOVERNMENT in the LEGISLATIVE COUNCIL, Mrs HISCUTT -
Reserve Bank Governor Lowe's announced on 19 March 2020 that the Reserve Bank is prepared to purchase Australian Government Securities - AGS - and securities issued by the state and territories central borrowing authorities, semis, in the secondary market as part of a package of measures to address the fallout from the current pandemic -
1. What is the total face value of Tascorp bonds purchased by the RBA since 19th March 2020?
2. To what extent is the Government and/or Tascorp involved in the bond purchases; and
a. Does either the Government or Tascorp have any active role in the process?
3. What has the open market purchases of Tascorp bonds meant for interest rates on Tascorp bonds?
4. For bonds of similar maturities how has the purchase price of Tascorp bonds compared with those issued by other States?
5. Does the fact that the RBA has indicated a willingness to purchase Tascorp bonds on the secondary market help determine the rates for future bond issues; and
a. If so, what are those rates?
6. Does the fact that RBA is willing to buy Tascorp bonds at certain prices mean the deliberations of Tasmania's credit worthiness by the various rating agencies have any practical relevance; and
a. If not, what is the ongoing relevance of the State's credit rating?
7. When are further issues of Tascorp bonds planned; and
a. What will be the trigger point for a new bond issue?
1. The RBA has purchased $127 million of TASCORP bonds as part of its Long dated Open Market Operations. The RBA last purchased semi government bonds on 8 May 2020.
2. TASCORP has no active or direct role in the bond purchase program. All purchases of bonds are facilitated by the RBA through the secondary market.
3. Interest rates have stabilised since the initial market volatility experienced in late March. There are many factors that impact interest rates, so the specific impact of the RBA’s Open Market Operations cannot be determined. However, like all other government bond interest rates, TASCORP’s rates have generally tracked lower since the implementation of the RBA’s policy.
4. The RBA has purchased bonds from all States and Territories in the secondary market as part of its Long-dated Open Market Operations at yields broadly consistent with indicative market pricing at that time.
5. The involvement of the RBA has greatly improved stability within the debt capital markets for government and semi government bonds. The RBA is targeting the 3-year government bond rate at 0.25 per cent. Longer-term interest rates are determined by a number of factors which makes it difficult to forecast rates for future bond issues.
6. The RBA’s involvement in purchasing semi government bonds assists market stability. The RBA has been explicit that its bond purchases are not directed towards achieving any particular yield or spread for semi government issuers. The standalone credit worthiness of the State will continue to be a significant contributor to the price of TASCORP bonds relative to other states and Australian Government bonds going forward.
7. While still subject to uncertainty as the final impacts of COVID 19 on TASCORP’s clients are unknown, the bond issuance program for 2020/21 is anticipated to be in the order of $2 to $2.5 billion. TASCORP’s issuance strategy remains to issue in periods when investor demand is strong.
Should the Member for Murchison require further more detailed information regarding the operations of TASCORP, the Premier/Treasurer, Hon Peter Gutwein MP would be happy to arrange a briefing from the Chair and CEO.