Australia's central bank on Wednesday said its A$300 billion ($200.67 billion) pandemic-era bond buying program (BPP) had benefits to the economy but will also cause large losses for the bank, potentially putting it into negative equity, reported Reuters.
In a review of the BPP, the Reserve Bank of Australia (RBA) estimated the financial costs of the program to the bank could range anywhere from A$35 billion to A$58 billion depending on the level of official interest rates.
The RBA will also take a large mark to market valuation loss on the bonds in its 2021/22 accounts, though this will be offset once the bonds mature in coming years. As a result, the RBA said it would likely be unable to pay a dividend to the government for several years.
The RBA's Board concluded the program was successful in lowering both borrowing coasts and the Australian dollar, but should only be used in emergencies in future.
AUD/USD resists reacting to the otherwise price-positive news as it remains pressured near the yearly low, around 0.6690 by the press time, amid pre-Fed anxiety.
Also read: AUD/USD sellers keep reins around yearly low under 0.6700, RBA’s Bullock, Fed eyed
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