Brian Chappatta: The Fed put is here to stay

Section:

Fed's ETF Purchases Have Changed Markets Forever

By Brian Chappatta
Bloomberg News
Monday, November 23, 2020

Last week's public spat between Treasury Secretary Steven Mnuchin and Federal Reserve Chair Jerome Powell may have set an end date for the central bank's unprecedented intervention in U.S. credit markets. But make no mistake -- the legacy of this episode will most likely permanently change investors' mindset during periods of crisis.

In particular, the Fed's swift purchases of corporate-bond exchange-traded funds set a clear precedent for the type of policy response that traders can expect during the next period of economic distress -- or what section 13(3) of the Federal Reserve Act calls "unusual and exigent circumstances."

... Dispatch continues below ...



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In contrast to the central bank's Main Street Lending Program and Municipal Liquidity Facility, which didn't get many takers, the Secondary Market Corporate Credit Facility revved up in a hurry and provided an even stronger backstop to financial assets than traders saw coming. ...

... For the remainder of the commentary:

https://www.bloomberg.com/opinion/articles/2020-11-23/fed-s-etf-purchase...

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