The Reserve Bank is buying government bonds for corona relief
It's a massive step.
The central bank will start buying government bonds as part of additional emergency policy measures aimed at easing the liquidity crunch triggered by Covid-19.
Basically what they're doing is providing cash into the market. What we've seen over the last few months is a complete and utter cash squeeze. When markets sell off you have investors having a look at what's happening in the market and what they do is they take their funds out of investments and keep it as cash... What this causes, is you know the funds normally have a certain amount of cash on hand to make sure they can pay these margin calls and they budget for withdrawals- but when withdrawals happen on a mass basis, complete panic ensures. That's pretty much what happened on the bond markets. We all have cash invested - if you're young, probably equities. If you're old, you're probably more invested in cash or bond markets. And if the bond markets are taking a knock - its' all good and well if you have not eroded your capital but the minute they wipe out the gains that you've made this year, it affects your income When people panic they cash out their policies. The more people cash in their things the more bonds we have to sell to give you cash.
Michelle Wohlberg - RMB
It's a very interesting day for markets. We saw complete disfunction entering the bond market in the last couple of days. So it really was necessary.
Peter Attard Montalto, Director and head of Capital Markets Research - Intellidex
But we 're going to have to think through after the crisis, questions about how you unwind this; how you prevent unnecessary incentives...
Peter Attard Montalto – Intellidex

Listen to the interviews below.
Get the 10 most-read articles of the week from Bruce Whitfield’s The Money Show, emailed to you every Friday morning.

Source : https://cdn.pixabay.com/photo/2016/10/09/19/19/coins-1726618_960_720.jpg
More from Business

What do flatulence-filtering undies (for real) have to do with Donald Trump?
A campaign for a UK underwear producer manages to attach itself to the US presidential transition, earning Andy Rice's hero award.
Read More
If interest rate remains stable, 2021 to bring more surprises in property market
Despite the pandemic, 2020 saw a rally in residential property sales. Andrew Golding examines the trends expected in 2021.
Read More
Top universities offering 1,500 free courses online. Grab the opportunity!
Harvard, Oxford, MIT... We need to take responsibility for keeping ourselves on the cutting edge, says futurist Graeme Codrington.
Read More
Sars drops ball with eFiling changes - 'We're working hard to convert service'
Most online forms have now been migrated to newer technology after Adobe stopped support for Flash Player on 31 Dec, says Sars.
Read More
6 trends that will drag us along in 2021 – life will never be the same again
The future is now different. The Money Show’s Bruce Whitfield interviews trends analyst Dion Chang, the founder of Flux Trends.
Read More
Alcohol ban: Consol, hanging by a thread, burns through millions to stay alive
It cannot stop its furnaces, so it must keep them going. Bruce Whitfield interviews Mike Arnold, CEO at Consol Glass.
Read More
Covid-19 vaccine: Government may have to milk bone-dry taxpayers some more
Treasury is mulling raising taxes, says Prof Adrian Saville, Chief Executive of Cannon Asset Managers.
Read More
Economy in 2021: 'Expect a better year for South African assets'
An economist expects China growth at 9.5%, US money-printing, rising metal prices and trade- and current-account surpluses in SA.
Read More
Retirement funds in SA are changing – new laws come into effect on 1 March 2021
Bruce Whitfield asks personal finance advisor Warren Ingram to explain in detail the new laws affecting provident funds.
Read More
Wine industry runs out of storage due to ban - R1.5b's worth could be lost
A new harvest is imminent and there's no more space for unsold wine. We have the highest stock level ever - Vinpro's Rico Basson
Read More