Last night Fed’s Kashkari said the Fed had “unlimited” money in order to fix the financial system. This morning the Fed announced they will buy corporate bonds geared towards Main Street, including the purchase of corporate bond ETFs. This means, like Japan, the Fed will be buying LQD — like morons, in a flaccid attempt to boost markets.
Can you blame them? This is all we have left.
Among the initiatives is a commitment to continue its asset purchasing program “in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy.”
That represents a potentially new chapter in the Fed’s “money printing” as it commits to keep expanding its balance sheet as necessary, rather than a commitment to a set amount.
The Fed also will be moving for the first time into corporate bonds, purchasing the investment-grade securities in primary and secondary markets and through exchange-traded funds. The move comes in a space that has seen considerable turmoil since the crisis has intensified and market liquidity has been sapped.
Other initiatives include an unspecified lending program for Main Street businesses and the Term Asset-Backed Loan Facility implemented during the financial crisis. There will be a program worth $300 billion “supporting the flow of credit” to employers consumers and businesses and two facilities set up to provide credit to large employers.
Futures went from ‘limit down’ to +500 to now milquetoast flat and sinking fast. How to analyze this? The Fed is throwing everything but the kitchen sink at the bond market now. The very last step would be the outright purchase of stocks, which is illegal — but who’s gonna stop them? Trump?
Bullish or bearish — gun to the head. UNSURE. Let’s see how the market trades.
NOTE: I had a double sized FAZ position heading into today. I sold it for +10%. I am presently 90% cash.If you enjoy the content at iBankCoin, please follow us on Twitter