This was a result of the Reserve Bank's purchases of government bonds in secondary markets to help achieve the yield target on 3-year AGS as well as improve the functioning of government bond markets. [3] By the early part of April, take-up of the Term Funding Facility (TFF), also part of the Reserve Bank's policy package, was adding further to banks' ES balances.
By mid April, there were signs that the increased supply of ES balances had met the surge in demand for liquidity in the banking system. This was evident in the sustained drop in the amounts dealt at our morning auctions. Financial conditions more broadly had also become more settled. Graph 3 shows that we had switched our approach in our OMOs over this period.