Fed's $3 trillion virus rescue inflates market bubbles

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By Kate Duguid
Reuters
Monday, July 13, 2020

The Federal Reserve's $3 trillion bid to stave off an economic crisis in the wake of the coronavirus outbreak is fuelling excesses across U.S. capital markets.

The U.S. central bank has pledged unlimited financial asset purchases to sustain market liquidity, increasing its balance sheet from $4.2 trillion in February to $7 trillion today.

... Dispatch continues below ...


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While the vast majority of these purchases has been limited to U.S. Treasuries and mortgage-backed securities, the Fed's pledge to bolster the corporate bond market has been enough to spur a frenzy among investors for bonds and stocks.

"COVID-19 is now inversely related to the markets. The worse that COVID-19 gets, the better the markets do because the Fed will bring in stimulus. That is what has been driving markets," said Andrew Brenner, head of international fixed income at NatAlliance. ...

... For the remainder of the report:

https://www.reuters.com/article/us-health-coronavirus-federalreserve-mar...

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