Prevent ‘Unusual Disruptions’
The Wall Street Journal reports Fed to Inject $1.5 Trillion in Bid to Prevent ‘Unusual Disruptions’ in Markets
The Federal Reserve said it would inject more than $1.5 trillion of temporary liquidity into Wall Street on Thursday and Friday to prevent ominous trading conditions from creating a sharper economic contraction.
“These changes are being made to address highly unusual disruptions in Treasury financing markets associated with the coronavirus outbreak,” the New York Fed said in a statement on Thursday
The New York Fed said it would conduct three additional repo offerings worth an additional $1.5 trillion this week, with two separate $500 billion offerings that will last for three months and a third that will mature in one month.
If the transactions are fully subscribed, they would swell the central bank’s $4.2 trillion asset portfolio by more than 35%.
Yet Another Round of QE
Here is the Fed’s Statement Regarding Treasury Reserve Management Purchases and Repurchase Operations
The Fed can label this however they want, but it’s another round of QE.
Bear Market Across the Board
Also consider U.S. Stock Rout Deepens in Broad Shift to Safety
The S&P 500 shed more than 7% shortly after the opening bell, plunging the index into bear market territory and triggering a 15-minute halt in trading. The drop marked the second time this week that a rarely-used circuit breaker was triggered.
On Wall Street, companies and exchanges are making contingency plans. The Chicago trading floor of CME Group said it would close at the end of Friday to preemptively avoid the spread of the virus. The New York Stock Exchange is also preparing a contingency plan in case it needs to close its iconic trading floor.
Some investors were disappointed Mr. Trump didn’t clearly articulate details of how he planned to get an economic stimulus package through Congress and the lack of coordination between the federal government and the Federal Reserve.
“What you really need is confidence building,” said Hani Redha, a London-based multiasset portfolio manager at PineBridge Investments. “That comes from giving detailed communication to the market about what they’re seeing and doing to develop the sense there’s a comprehensive approach.”
Clearly Rattled Trump Bans All Travel From EU Starting Friday
Last night President Trump addressed the nation. It was a terrible performance in which he blamed the EU and praised his own actions. There was no empathy for Italy. His own assurances as recently as a week ago that the coronavirus was no big deal can now readily be seen as lies.
For more discussion, please see A Clearly Rattled Trump Bans All Travel From EU Starting Friday.
If you wish to see his 10 minute speech, the above link posts the full video.
Economic Reports are Meaningless Now
This morning, I commented Economic Reports are Meaningless Now
I now have the perfect example: Calculated Risk reports Fed’s Flow of Funds: Household Net Worth Increased in Q4
How meaningless is that?
The second quarter of 2020 rates to be a doozie.
Here Is What Was Behind Yesterday’s Unprecedented Treasury Dislocation
ZeroHedge has an interesting report on dislocations.
Please consider Here Is What Was Behind Yesterday’s Unprecedented Treasury Dislocation
The Fed seeks to prevent unusual disruptions.
Ooops. It’s too late for that.
In fact, Fed policy is responsible for these disruptions through its inflationary tactics that create bubbles.
As noted previously, a Very Deflationary Outcome Has Begun: Blame the Fed
Mike “Mish” Shedlock
See you later deflation !, long life to inflation!. They start already pumping huge amounts of fiat air in the leaking tire !
That is the new monetary theory supposed to avoid forever what happened in the 1929 to 1935 period. In the long term the outcome point to money destruction and hyperinflation. But in the long term we are all dead for sure.
What the heck? A day or two ago they had no secondary market TIPs to buy at Fidelity, and now I see it appears they have them across the maturity range, giving relatively hefty returns (0-2 years, and 20+ years). Is this a consequence of the “treasury dislocation” mentioned earlier, or am I misreading the data?
It means the Fed is starting to panic.
They will eventually start buying stocks. If Friday is a bloodbath, expect it on Monday.
Friday the 13th is an appropriate day for Armageddon to hit it’s stride.
Not in their charter to purchase equities. Need Congress to amend.
Now? Possibly, but don’t see how they can do much until some sort of bottom found.
Main worry is the Treasury market. That is the castle keep. If they lose control there – Game Over.
Not sure what you mean? Failed auction (will have to wait), or treasuries not accepted as collateral?
Countless rules have been broken, don’t expect this one to last. Until they pass a law, it will be routed through primary dealers or some such trick.
“they have committed to a total $5T over the next 30 days”.
The Goldman Sachs cabinet is salivating… they’ll swallow this, give a delicate burp, and scream for more.
Very much an unprecedented desperation move, this is very serious
Interesting how some stocks holding up. AMZN and MSFT are near Oct 2019 levels. TSLA still above 2019 levels … what would it take to crash, thermonuclear war?
The adage needs to be revised to “when the tide goes out, you see those who are propped up by government.”
There are no safe havens, for now.
Everything getting pole axed.
Scramble to delever and get to cash prompts selling across the board.
Until the last of the ‘Mortimer and Randolphs’ are carried off the battlefield, I imagine this will continue.
If selling continues look for Federal Reserve to step up its game forthwith.
That is how I read it. Thanks
Prop up the banks but let the virus spread unhindered among the poor and working classes. Republican mentality at its finest.
Of course they are. The system needs cash since so many are selling their stocks.
“The system needs cash since so many are selling their stocks.”
Many has nothing to do with it. A few connected ones is what matters. Of course, they’d sell regardless. But by robbing the rest by debasement, in order to fund buying from those few at artificially inflated prices, The Fed again fulfilled it’s mandate of robbing the rest, in order to hand unearned wealth to connected dilettantes.
Is ZH alarmist or was the 30y treasury auction near failing? Does it mean no buyers?
I think it took out a most recent large dip in yield from the last couple days , with when-issued betting on that dip remaining, but that doesn’t answer as a whole what positions are being taken or why exactly – you cannot say where yield should be in a market like this, so cannot say if it is high or low etc. ?