Fed Does Another Emergency Repo and Relaunches Commercial Paper Facility

Mish

The Fed keeps trying things hoping that something will stick.

Fed Restarts Commercial Paper Facility

Bloomberg reports Fed Restarts Commercial Paper Facility to Ease Market Strain

The central bank is using emergency authorities to establish the Commercial Paper Funding Facility with the approval of the Treasury secretary, according to a Fed statement on Tuesday. The Treasury will provide $10 billion of credit protection from its Exchange Stabilization Fund.

The move follows mounting pressure to act after the Fed’s Sunday evening emergency interest-rate cut to nearly zero and other measures failed to stem market strains as investors reacted to the risk that the virus will tip the U.S. and global economy into a potentially damaging recession.

“By providing short-term credit, the CPFF will help American businesses manage their finances through this challenging period,” Treasury Secretary Steven Mnuchin said in a separate statement.

The Fed said it will provide financing to a special-purpose vehicle that will purchase A1/P1 rated commercial paper from eligible companies, and purchases will last for one year unless the Fed extends the program.

Fed Announces Yet Another $500 Billion Repo

In other news, the Fed announced another $500 billion in repos. That puts announced repos at the $2.5 trillion level.

Bond Market Remains Broken

Despite these emergency measures, the Treasury market remains broken.

The 10-year treasury yield rose again by 11 basis points to 0.838%.

The 30-year long bond yield rose 9 basis points to 1.417%.

And the 5-year treasury yield rose to 6 basis points to 0.556%.

Mike "Mish" Shedlock

Comments (21)
No. 1-11
MiTurn
MiTurn

Not to be facetious, but is there some sort of trickle-down-effect to this?

Tony Bennett
Tony Bennett

"The Fed keeps trying things hoping that something will stick."

Yes. And throw in fiscal stimulus du jour.

Sit back and count the half life of THIS measure.

Mr Market does not like half measures (or even full measures, heh heh).

Tony Bennett
Tony Bennett

"Bond Market Remains Broken"

And will probably remain that way until the excess leverage in the risk parity funds wrung out. Max Pain all around.

Casual_Observer
Casual_Observer

All these measures will prevent mass unemployment unlike the 2007-2009 financial crisis. The economy was ok before coronavirus growing at 2-3%. During the great financial crisis the Fed and Treasury actually responded too late. We may get a deep recession but I expect a V-shaped recovery after mid-late summer. Despite what many may see as another financial crisis, it isn't going to happen. Don't be surprised if China lifts up the world as production comes back online as they recover from Covid-19 first. Also it looks like protocols with the HIV antivirals and anti-malaria medication seem to have some positive results in southeast Asia and Australia as they did with previous coronaviruses in SARS and MERS. Those medicines may be become crucial soon for the world.

crazyworld
crazyworld

The only thing which was ok in US before the coronavirus : assets gigantic inflation.
In 2019 stock markets rose more than 20 PER CENT. Trump has no natural knowledge in coronavirus but he has a fondamental expertise in playing game for money rules (trough his casinos background).

The real economy producing goods and services was in recession already but the 2019 enormous influence of assets inflation on GDP and the hidden inflation gave positive numbers. When a country print money (and scandalously promote out of proportion assets inflation) the first result it gets is very positive that is full employment.

It is probable that after the virus production wealth destruction victims would have been refunded by FED printing press and government deficit spike, a quick recovery would happen as was the case in 1987, 2000, 2008. This time the FED balance sheet will pass over the one trillion mark and the US debt will rise another 20-30 per cent of and the interest rate will be maintained around zero.
The middle class American will like before (1987, 2000, 2008) again loose another part of their living standard level while the billionaires will be made even.
The only black swan which would destroy QE to infinity is the value of the dollar that is the confidence peoples working to supply US with almost now everything manufactured (like China) will maintain or not in such a fiat printed money.

RonJ
RonJ

CPFF

How many more cans of alphabet soup is the FED going to open?

Six000mileyear
Six000mileyear

The brings a knife to a gunfight.

Realist
Realist

This pandemic is the black swan event that will alter my long term growth forecast. Previously, I expected an average of 1% growth throughout this decade and zero growth after that. Now I expect zero growth in the US, on average, going forward indefinitely. This year could easily be -10%. Followed by 2-3% for the next few years. Forecasting individual numbers for each year is a wild guess. But long term zero growth is baked in.

Carl_R
Carl_R

The Fed just isn't pushing hard enough on that string! Come on Fed, keep pushing harder, eventually something will happen. Or not.

phatmaster
phatmaster

Even though I was never a big fan, watching the dollar die still makes me sick.


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