Fed Enlists BlackRock In Its Massive Debt-Buying Programs

Marco Green
March 25, 2020

The Federal Reserve announced a number of steps on Monday meant to shore up the U.S. economy during the coronavirus crisis.

Asian stocks rallied on Tuesday because the U.S. Federal Reserve's sweeping pledge to spend no matter it took to stabilize the monetary system eased debt market pressures, even when it couldn't offset the fast economic hit of the coronavirus.

A new "Main Street Business Lending Program" that will extend credit to small- and-medium sized businesses will also be announced "soon", the Fed said.

In its latest drastic step, the Fed offered to buy unlimited amounts of assets to steady markets and expanded its mandate to corporate and muni bonds.

Almost a third of the US population has been urged to stay indoors and authorities have mandated the shutdown of large parts of the service sector to keep people safe.

"The Fed is still working to maintain the flow of credit because they know what happened during the Depression (when) too many firms went under", Duy said.

"Economies around the world are going offline and that is devastating for economic activty, it's creating the most robust dislocation in financial markets in living memory".

Still, he said, without massive fiscal aid such efforts won't be enough.

Lawmakers on Monday were expected to take another swing at passing a stimulus bill that failed over the weekend.

Around 470 people have died due to the virus, it said.

One of the programmes, the Term Asset-Backed Securities Loan Facility (TALF), will help backstop recent student loans, vehicle loans and credit card debt as well as small business loans.

The Fed has previously announced it would purchase at least $500bn of Treasury securities and at least $200bn of mortgage-backed securities but will now buy bonds in "the amounts needed to support smooth market functioning". US corporate credit investors for their part welcomed the Fed's move, sending up prices of USA investment-grade corporate bond exchange-traded funds.

Hypothesis is mounting information due on Thursday will present US jobless claims rose an eye-watering 1 million final week, with forecasts ranging as excessive as Four million.

This is the Fed's all-out effort to ensure that the business sector and households can continue on, said Sam Bullard, senior economist for Wells Fargo Securities.

"The special role of the Dollars in the world's financial system - it is used globally in a range of transactions such as commodity pricing, bond issuance and worldwide bank lending - means USD liquidity is at a premium", said CBA economist Joseph Capurso.

Other reports by Click Lancashire

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