* RBA ready to buy Australian govt bonds in secondary market

* To announce further policy measures on Thursday

* One-month OIS falls to 28 bps vs cash rate of 50 bps

* Analysts expect emergency rate cut, QE on Thursday

By Swati Pandey and Wayne Cole

SYDNEY, March 16 (Reuters) – Australia’s central bank pumped extra liquidity into a strained financial system on Monday and said it would announce more policy steps later in the week as it joined global efforts to counter the damaging impact of the coronovirus epidemic.

Australia’s one-month overnight index swaps slipped to 0.28% compared with the underlying policy cash rate of 0.5%, indicating investors were pricing in a further rate cut on top of a 25 basis point easing delivered just this month.

Reserve Bank of Australia (RBA) Governor Philip Lowe said policymakers were ready to purchase local government bonds in the secondary market, a key pricing benchmark for the Australian financial system.

Further policy measures to support the Australian economy were expected on Thursday, Lowe added.

“Another rate cut and quantitative easing seem inevitable given the impact the extended measures to manage the spread of the coronavirus will have on the Australian economy,” said David Plank, economist at ANZ Banking Group.

Analysts fear economic activity will contract in the current March quarter as the virus hammers tourism and trade, raising the risk the country could slip into its first recession since 1991.

Any further easing by the RBA would mirror similar efforts by its peers, including the U.S. Federal Reserve which on Sunday cut rates by 100 basis points in an emergency move to buttress a world economy unraveling rapidly amid the coronavirus pandemic.

In slashing interest rates to near zero, the Fed also pledged hundreds of billions of dollars in asset purchases and backstopping foreign authorities with the offer of cheap dollar financing.

“I’m a little surprised there is not a bit more detail today from the RBA,” said Su-lin Ong, Sydney-based chief economist at RBC.

“Clearly they are fine-tuning what will be in their package of measures,” she added.

“They will cut rates to 0.25% but that is irrelevant now, what is relevant is the unconventional policy measures.”

The central bank is already pumping in more money into the system in a bid to ensure business and households have access to credit as the coronavirus causes chaos in global financial markets.

The RBA said earlier it would conduct one-month and three-month repo operations until further notice to provide liquidity to Australian financial markets.

The Bank used its daily money market operation on Monday to add A$5.9 billion ($3.64 billion) to the system through regular repurchase agreements, well above its original intention of A$2.5 billion.

That followed an injection of A$8.8 billion on Friday, which had left commercial banks with a hefty A$10.7 billion of surplus cash held at the RBA.

Monday’s operations ranged from 4 days to 93 days, with A$4.6 billion going at the longest maturity.

Australia’s Council of Financial Regulators (CFR) said in a separate statement on Monday it would meet with major lenders later this week to discuss how they can best support households and businesses. (Editing by Shri Navaratnam)

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