Fed fires an even bigger bazooka, expands its shopping list to include junk bonds

[UpInArms]

Source: CNBC

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.

Read more: https://www.cnbc.com/amp/2020/04/09/fed-fires-an-even-bigger-bazooka-expands-its-shopping-list-to-include-junk-bonds.html

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This hole is getting bigger and deeper by the hour

[Newest Reality]

1. Wow!

Shark food?

[ashredux]

2. This will come back and bite us on the butt....big time

[SWBTATTReg]

3. This is ridiculous. Now the feds is supporting incompetent businesses by buying up their bonds?

And where are the republicans in all of this? Where are they hiding? Why aren't they complaining that businesses already doomed to fail should be allowed to fail? That is, if they already were in the process of going bankrupt (as foretold by those who issue loans and bonds by assigning a junk bond rating to their securities of failing companies). Why rescue them? Probably because some of them are rump's buddies, it wouldn't surprise me.

[Igel]

4. No, they're not supporting incompetent businesses by buying up their bonds.

These aren't new issues. The businesses aren't the ones who are selling these bonds.

Th Federal Reserve is supporting people and institutions that invested in below investment-grade bonds by buying them (with the purchase price going to the investor) and helping to support their prices (so that their valuation doesn't collapse).

[SWBTATTReg]

9. In a way they are supporting these failing businesses by providing a support level to their ...

failing bond prices (hence increasing the yields) and thus, allowing these failing companies to continue issuing worthless junk bonds e.g., 'hey, there is a market for our junk bonds' and will turn around and yet again, issue more junk bonds.

The Feds should not support investors and/or institutions that allowed these failing companies to issue junk bonds (that's why they call them 'junk bonds'). Let the free market handle them, otherwise what's going to happen is that their bad businesses models will be prolonged longer and cause more pain in the long run.

A big chunk of these bond underwriters are banking on the high interest rates that the junk bonds must pay to attract buyers, and thus are the ones really pushing for the sales of these garbage bonds. Of course the failing businesses still pay the same amount of interest payments but the value of the bonds are collapsing, causing yet more higher interest rates being paid on the bonds, and unsuspecting buyers, unaware of the bad business practices that caused the business to go under, are still there.

[Squinch]

10. But the people who invested in them knew they were insanely risky.

They decided to take the risk on the possibility of big returns.

Why should they be bailed?

[SWBTATTReg]

16. Exactly. The market knows too well in advance that most of these bonds are junk. They're ...

simply trying to dump these bonds onto unsuspecting people, I suspect, so they can get at least something back on their failed investments (the bankers/underwriters/etc.).

Beware! Sure the interest yield is a heck of a lot more now than in the recent past, but interest rates at high rates should send a flag up in anyone's mind that something is wrong w/ the underlying investment/company.

[turbinetree]

5. And the Harold Hamms of the world are going to love this again.....................

[SWBTATTReg]

13. Really. They indeed must be loving the govt buying their collapsing bond prices (and...

increasing yields)...what's that saying to let the markets act as they should, w/o interference? Isn't it amazing that people continue to gripe about socialism etc., and yet that is exactly what we are doing here (the Feds)?

[turbinetree]

14. Exactly.................you said it perfectly................that what so maddening.............

there junk bonds for fracking are collapsing and then we the public go and support them under this plan, and they in turn go to the libertarians in the government and scream about socialism.................this is just amazing....................

[SWBTATTReg]

17. Yes, and this is going to come back and bite them in spades later. I can't wait now, when I ...

hear the 'but its socialism!' arguments now. Pathetic.

[SWBTATTReg]

23. An update...you must have the ability to read the future!

U.S. banks prepare to seize energy assets as shale boom goes bust
Source: Reuters BUSINESS NEWS APRIL 9, 2020 / 5:38 PM / UPDATED AN HOUR AGO
Exclusive: U.S. banks prepare to seize energy assets as shale boom goes bust David French, Imani Moise

NEW YORK (Reuters) - Major U.S. lenders are preparing to become operators of oil and gas fields across the country for the first time in a generation to avoid losses on loans to energy companies that may go bankrupt, sources aware of the plans told Reuters.

JPMorgan Chase & Co (JPM.N), Wells Fargo & Co (WFC.N), Bank of America Corp (BAC.N) and Citigroup Inc (C.N) are each in the process of setting up independent companies to own oil and gas assets, said three people who were not authorized to discuss the matter publicly. The banks are also looking to hire executives with relevant expertise to manage them, the sources said.
+++++++++++++
SWBT...I didn't post all of this DU article posted this AM, but I thought it was very appropriate...

[Miguelito Loveless]

6. This a bail out of Trump's masters

and probably himself. Any bond debt he ever issued is rated junk.

[PSPS]

7. I guess even the nefarious PPT isn't enough to cover a turd pile this high

[yaesu]

8. I knew the banksters would get another 2009 bailout. nt

[bucolic_frolic]

11. Toxic assets for the Fed

A financial black hole owned by the lender of last resort

Powell is insane

[elleng]

12. @1:20 p.m.

S&P 500
+2.23%
Dow
+2.18%
Nasdaq
+1.26%

[IronLionZion]

15. I'm giving it all she's got, Captain!

[beachbumbob]

18. Will the democrats ever hold hearings into the Fed's action and the countless TRILLIONS the FED have

blown thru?

Good god, what a slap in the face on "free market capitalism" and some one needs to explain why such monies are made availble the wealthy and not so much the people

[bucolic_frolic]

19. The purpose of government has become to protect wealth and wealthy from everything

Socialize the costs, privatize the risk for the God-anointed job creators. Allow them to pay you a fraction of what you produce for them, then charge them high prices to keep you poor. This is called "motivation", incentive to work. To keep the system from collapsing from lack of demand because profits are raked off into private hands, lend the poor money and let the Fed stimulate demand.

The concept of the common good, the Commonweal, the state as Commonwealth, has been lost in these hideous contortions. Society is upside down. We elect them, yet we serve them far more than they serve us, which is exactly the opposite of any theory of democracy from the Enlightenment.

[beachbumbob]

20. doesn't mean an effort can't be made

[bucolic_frolic]

21. I wanna believe, I really do

until voters wake up and throw the bums out, not much will happen

[old guy]

22. And the scam continues.