Jeff Fawkes is a seasoned investment professional and a crypto analyst. He has a dual degree in Business Administration and Creative Writing and is passionate when it comes to how technology impacts our society.
The Fed has taken a decision to issue over 1 trillion dollars during coronavirus attack citing the necessity of market support. However, some critics say that the market is doomed, both on traditional and cryptocurrency levels.
If you have to take $1.5 trillion and throw it into the economy, the bids are probably high. What will happen is that the markets will receive cash while consumers will keep sitting at homes. Despite the money will go towards rescuing the corporation markets first, they will not magically fix coronavirus concerns. People don’t care about numbers anymore and withdraw from everything to obtain cash and buy some food. The American Federal Reserve wants to put a portion of the cash into Treasuries, bonds and stocks buyout. Recently, the stock market had shown signs of recovery, but the green hours didn’t last long. On Thursday, the Fed has decided to take action regarding the markets while coronavirus is spreading. This was the third time in the week when the Fed is pulling the leverages to fix the unexpected collapse.
Streets Heading to 1987, Repo Market Receive Steam
But the most important thing – the repo market comes to play. The government will be issuing them every week. There is $175 billion planned for the overnight repo. Also, $45 billion is set to go towards the two-weeks repo. The New York Fed will offer a total of $500 billion for the repo deal market. Now, Wall Street analysts are saying that the economy is heading towards 1987.
The yield for government-backed bonds is moving down because the market is in preparations for a global recession. Some ask questions like ‘what will happen in case the market goes red tomorrow?”. The repo market is set to help out with propositions. Christopher Whalen from Whalen Global Advisors said:
“The virus was the catalyst but it’s not the cause. Both bonds and equities were inflated rather dramatically by our friends at the Fed. You’re seeing the end game for monetary policy here, which is at a certain point you have to stop. Otherwise, you get grotesque asset bubbles as we saw”
The moves appear after the market went totally red. It looks so bloody that even the biggest economists refuse to analyze the situation.
Will Fed Rule Out the Coronavirus Trouble with 1.5 Trillion?
Per the Fed, they want to make ‘the terms of operations to be adjusted as needed to foster smooth Treasury market functioning and efficient and effective policy implementation.’ The Fed will put a ton of money into buying out the bonds, stocks, bills, Treasury Inflation-Protected Securities and a ‘range of maturities’. The Central Bank claims it will buy out coupon-bearing securities.
Last week, the Fed executed a rate cut, but this had zero impact on the economy. On Monday, the Fed is increasing the limit for repo markets in a second move to stabilize the house of cards. Finally, on Wednesday they introduce a heavy $50 billion worth offer that had attracted lots of investors in the next 24 hours.