It's been just over a month since the Reserve Bank embarked down the quantitative easing (QE) path.
In one fell swoop, the bank went from the conventional to the unconventional.
The former involves the use of an official cash rate and the latter is when the bank buys government bonds.
Monetary policy purists don't like the phrase "money printing" but that's what QE boils down to.
It's been widely used in major markets overseas in the aftermath of the Global Financial Crisis but it hadn't previously been employed here.
Until now, the economic situation has not been dire enough.
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The Reserve Bank's first response to the upheaval arising fron the Covid-19 pandemic was on March 16 - a Monday - when it slashed its official cash rate by 75 basis points to 0.25 per cent.
As the week progressed the bank stepped in with measures to ensure "smooth market functioning" of the market but stopped short of instituting a programme of large-scale QE.
At the time, world markets were in turmoil and the local market was bracing for an avalanche of government bonds to fund its fiscal stimulus package.
Liquidity in the government bond market dried up, and government bond yields rose - the reverse of what would normally be expected in the aftermath of a three-quarter-point rate cut.
Monetary conditions were tightening rather than loosening.
Bond prices were falling and yields were rising - exactly what the Reserve Bank didn't want.
Assistant Governor Christian Hawkesby announced measures to provide additional support to domestic financial markets and the bank introduced a Term Auction Facility to alleviate pressure in the funding markets.
But by the end of the week, yields were still rising - amounting to what one bank called a "perverse tightening of financial conditions". It was becoming clear that more action was needed.
On the following Monday, the Reserve Bank announced a $30 billion bond buying programme.
In response bond prices rose, yields fell, and some semblance of normality was restored.
A huge funding programme lies ahead.
In this quarter alone, the Government, through the Treasury, is set to issue $17b in bonds to fund the various fiscal stimulus packages. The Treasury's funding arm - NZ Debt Management (NZDM) - is also forecast to increase its Treasury bills outstanding by $7b.
The previous biggest quarter for funding was in 2011, in the aftermath of the Christchurch earthquakes, when NZDM raised just $5.6b.
So far so good
So how has the Reserve Bank done with its first stab at QE?
As far as the local debt market is concerned, it's so far, so good.
"So long as the Reserve Bank sticks to its inflation targets and its other targets, it really doesn't change anything," Westpac senior market strategist Imre Speizer said.
"Where it is dangerous is in those countries that don't have credibility in their the central banks, and where you get inflation going well out of control," he says.
The latest policy targets agreement signed between the Government and Reserve Bank Governor Adrian Orr in 2018 requires the bank to target annual inflation to between 1 and 3 per cent, and to support maximum levels of sustainable employment within the economy.
"I have got to say that they have normalised the market," Speizer says.
"The bond market was performing poorly and now its performing kind of normally and its relativity to swap rates is around about where it was pre-Covid, so it has normalised."
The QE programme as it stands at $30b is widely expected to increase, perhaps to $50 to $60b.
BNZ interest rate strategist currency Nick Smyth said it was clear something needed to be done.
"Rates are both a lot lower than they were before the announcement and they are the lowest that they have ever been. So that gets a tick," he said.
Smyth, harking back to mid-March, said: "The equity markets were getting smoked. Market participants were clearly worried about the biggest economic shock in a generation and at the same time government bond yields and interest rates [had] risen really sharply."
"Usually in these kinds of dire situations, people rush away from equities towards bonds as a safe haven, but the opposite was occurring."
The bond market was becoming illiquid. As bond buyers became scarce, prices fell and yields rose.
"The market was very wary of what was going to be incredibly high issuance of these government bonds because the market reacted decisively to this Covid-19 shock," Smyth said.
Part of the objective of QE was to restore market function at a time when the market was preparing for a the wave of government bonds.
"At the time the market was concerned that it would be difficult to attract a quantum of demand at reasonable interest rates when offshore investors were pre-occupied with things going on elsewhere.
"The Reserve Bank, through QE, was able to tell the market that it was there to act as a backstop buyer.
"In that respect, again, they have been successful."
"Market liquidity has improved immeasurably from what it was before QE was announced."
Smyth says volatility is still higher than unusual but a lot lower than it was in March and early April.
"I think they get ticks from that perspective," he said.
The overseas experience with QE is that it is no solution, by itself.
"In this case, it is trying to offset what has been an incredible shock," Smyth says.
"QE on its own might not be a panacea but QE in combination with very aggressive fiscal policy can be a very effective policy.
"So it has to be in combination with very aggressive fiscal policy."
The debt market has also given a big tick to the Reserve Bank's moves to buy local authority bonds.
The initial problem with the Reserve Bank's buying of government bonds was that the effects were not transmitted to other parts of the market.
That changed on April 7 when the bank lifted its QE total to $33b - including $3b of local authority debt. The Reserve Bank buying of government bonds should have in theory lowered yields for other bonds, but that's not the way it happened.
"They saw that as being far from ideal and took the step to include LGFA bonds. Local councils get 90 per cent of the debt funding through [those] - and are the biggest debt issuers outside of the Government".
The $3 billion targeted for non-government bond issuance had had a "pretty powerful" effect.
Before long, the Reserve Bank's $30b QE programme is expected to double to around $60b.
Hamish Pepper, fixed income and currency strategist at Harbour Asset Management, said the Reserve Bank had been effective but that it had been able to learn from the overseas experience.
"The bond buying has been helpful for the market to digest issuance and keep interest rates lower than they otherwise would have been," Pepper said.
He added the beneficial effects of the bank's actions in local authority debt had flowed through into the corporate bond market.
"If they were to get some kind of grade as in a report card, it would have to be something in the "A" category," Pepper said.
"It's up there, and it's been effective."