Yesterday the Fed entered uncharted waters with its promise of ‘unlimited’ bond purchases as it went all in to try to stop the spread of the coronavirus from devastating the American economy. The Fed promised to purchase as much government-backed debt as needed to bolster the markets for housing and Treasury bonds. It announced that it would buy corporate bonds, and for the first time in its history, included the riskiest investment-grade debt. It also promised to unveil more help to the economy, including supports for small businesses, in the days and weeks to come.
The Fed, which only restarted its huge bond buying programme 8 days ago, announced it would go well beyond the ‘at least’ USD700bn in US Treasuries and USD200bn in mortgage-backed securities it initially pledged to buy. Instead, members said they will buy bonds ‘in the amounts needed to support smooth market functioning’, including buying government-backed debt tied to commercial real estate.
At least for once Trump was happy, telling Federal Reserve Chairman Jerome Powell he was ‘proud’ of his handling of the economic turmoil brought on by the virus, a far cry from his previous statements. The leader of the free world said ‘I really think he's caught up and he's done the right thing, and I think, ultimately, we will be rewarded because of the decision he made, he's really stepped up over the last week’, adding, ‘Jerome, you've done a really good job’.