Last month, the RBA launched $90 billion term funding facility (TFF) as part of its response to the economic fallout from COVID-19.
The TFF is aimed at supporting the flow of credit to small and medium-sized businesses by providing authorised deposit-taking institutions (ADIs) with three-year funding facilities at a fixed rate of 0.25 per cent.
Under the TFF, ADIs can draw down on funding of up to 3 per cent of their existing outstanding credit and will have access to additional funding if they increase lending to business, particularly small and medium-sized businesses (SMEs).
However, in an analysis of data published by the RBA, ANZ Research has found that ADIs have drawn down just 2.6 per cent of total funds available since the TFF was launched.
“The pace has been slow so far, with only $2.4 billion taken down as at 15 April,” ANZ Research observed.
“Over $89 billion is still available, with the initial allowance (around $84 billion) needing to be drawn down by no later than September.”
But ANZ Research noted that it expects uptake of the TFF to accelerate in the months ahead, attributing the slow start to “strong deposit inflows”.
“Use of the TFF will pick up as bank term debt maturities rise as 2020’s $70 billion of term debt maturities (for the majors) need to be refinanced,” the group added.
According to ANZ Research, the TFF has already had a significant impact on funding markets, contributing to a sharp decline in bank bill swap (BBSW) rate exchanges.
“The access to this cheap source of funding for banks has certainly had impacts elsewhere with [three-month] BBSW reaching record lows as banks issue fewer bills,” ANZ Research noted.
In its analysis, ANZ Research also found that the RBA has “pulled back” the amount of liquidity it has supplied to the banking sector through repurchase (repo) transactions on the overnight money market.
“The average daily amount dealt by the RBA over the last week was just $1.24 billion, well below the average $4.27 billion dealt on average in March,” the group stated.
“This decline is not surprising given the normalisation in AUD funding market conditions and the liquidity the RBA is providing through bond purchases and TFF.
“We anticipate they will likely maintain a similar level of injection through repo going forward for the next few weeks.”
[Related: RBA closes $36bn in QE transactions]
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Charbel Kadib is the news editor on the mortgages titles at Momentum Media.
Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.