Tuesday, 29 September, 2020

Fed Enlists BlackRock In Its Massive Debt-Buying Programs

Federal Reserve details new steps to stabilize economy amid coronavirus crisis Fed vows unlimited bond buying to soothe market
Ginger Lawrence | 25 March, 2020, 17:24

BlackRock, the world's largest asset manager, will serve as an investment adviser and manage assets for three separate programs, the New York Fed said Tuesday.

The rate on 10-year Treasuries plunged following the announcement, flattening the yield curve, while the dollar dropped and U.S. stock futures pared their earlier losses. The second program will buy debt already acquired, especially by large employers, the third will be the Term Asset-Backed Securities Loan Facility, a program created initially in the 2008 crisis and which provides loans to small businesses and households.

"It's their bazooka moment", said Russell Price, chief economist at Ameriprise Financial Services in Troy, Michigan.

As part of that program, the Fed has committed to purchasing billion of dollars of commercial mortgage-backed securities (CMBS) secured primarily by multifamily home mortgages guaranteed by housing giants Fannie Mae and Freddie Mac.

Almost a third of the US population is subject to new rules that close non-essential businesses and discourage people from leaving their homes in order to slow the spread of the virus.

New Yorkers fleeing coronavirus hotspot need to self-isolate, White House says
Mr Pence said the federal government was "surging resources" to the NY area, including 4,000 ventilators in the next 24 hours. Big Apple residents were nearly ten times more likely to be infected than any other Americans, noted Dr.

"The Board recognizes that the current situation is significantly affecting areas of the country in different ways and will work with financial institutions to understand the specific issues they are facing", the Fed said in a separate statement.

The U.S. economy is now suffering from three material economic shocks, as global trade disruptions, mandated domestic business closures, and disruptions in lending from severe financial market stress will contribute to a large contraction in U.S. economic activity in 2Q.

A Reuters poll of economists estimated initial jobless claims rose an astounding 1 million last week, and some believe the number could be higher.

"While great uncertainty remains, it has become clear that our economy will face severe disruptions", the Federal Reserve said as it revealed the plans. "It's their we'll do whatever it takes moment which should be a sign to financial markets and investors that the Fed will provide any and all liquidity necessary to support the economy through this period".

The Fed is doing everything they can to keep markets functioning smoothly after economic activity was disrupted, he said We take this as a huge easing.