CNBC’s Steve Liesman reports that the Fed will slow purchases of Treausrys and mortgages.
The Federal Reserve dramatically expanded its efforts to save the economy, even adding junk bonds to the list of assets it can buy, as a wave of businesses are anticipated to have trouble surviving the expected recession.
Stocks jumped, Treasury yields rose and the dollar sagged after the Fed said it would would provide $2.3 trillion in programs that expand its operations to reach small and midsized businesses and U.S. cities and states. Gold futures surged $51, a 3% gain to $1,735 per ounce on the view that the Fed initiatives could be inflationary.
Corporate debt ETFs also rallied. The iShares IBoxx $ Investment Grade Corporate Bond ETF was up 3.2%, while HYG, iShares iBoxx $ High Yield Corporate Bond ETF surged 6.8% in its biggest move since 2008.
The Fed provided details of some programs it had already announced, but added some new ones and some surprises. Fed Chairman Jerome Powell said after the announcement that the Fed was aiming its efforts at the part of the real economy that need the most help and that other programs could be added.
As part of its announcement, the Fed expanded its corporate lending programs to take it into an entirely new area, including ETFs of companies that are rated below investment grade. It had previously announced a program to buy investment-grade corporate debt and ETFs. It also will now accept triple-A-rated commercial mortgage-backed securities and collateralized loan obligations as part of its Term Asset-Backed Securities Lending Facility, first created in the financial crisis.
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