Anonymous ID: cc4582 May 11, 2020, 7:40 p.m. No.9133365   🗄️.is đź”—kun   >>3680 >>3827 >>3856

Fed says it will start buying corporate-bond ETFs on Tuesday

 

The Federal Reserve's new lending facility will begin purchasing corporate bond exchange-traded funds on Tuesday, the New York Fed announced Monday evening. The Fed said most of the purchases would be in exchange-traded funds with exposure to U.S. investment-grade corporate bonds, but some of the purchases will be of ETFs whose primary exposure is to U.S. high-yield corporate bonds. The Fed said it will soon start purchasing debt issued by companies directly. Analysts said the Fed's announcement of the lending program in early April was enough to arrest turmoil in corporate bond trading and has allowed businesses like Boeing to issue debt. The New York Fed said the U.S. Treasury Department had made $37.5 billion of the $75 billion equity investment it will make in the special purpose vehicle established by the central bank to undertake the primary- and secondary-market credit facilities. Treasury Secretary Steven Mnuchin said earlier Monday he had sent the Fed money for the program.

 

The “preponderance of ETF holdings” will consist of those mainly exposed to U.S. investment-grade corporate bonds, with the remainder largely exposed to U.S. high-yield corporate bonds, the New York Fed announcement said.

 

Other factors being considered for eligible ETFs include the composition of investment-grade and non-investment-grade rated debt, the management style and the amount of debt held in depository institutions.

 

Blackrock Agreement

 

The reserve bank also posted to its website the investment management agreement with BlackRock, the asset-management giant it’s retained to administer the program. The document offered more information on the strategy the Fed would pursue.

 

Corporate-debt buying, including via ETFs, will occur in three stages, according to the agreement: a “stabilization” phase, an “ongoing monitoring” phase, and a “reduction in support” phase.

 

“Purchases will be focused on reducing the broad-based deterioration of liquidity seen in March 2020 to levels that correspond more closely to prevailing economic conditions,” the document said. It listed an array of metrics that would guide investments, including transaction costs, bid-ask spreads, credit spreads, volatility and “qualitative market color.”

 

“Once market functioning measures return to levels that are more closely, but not fully, aligned with levels that correspond to prevailing economic conditions, broad-based purchases will continue at a reduced, steady pace to maintain these conditions,” the document said.

 

The corporate credit facilities are among the nine emergency lending programs the Fed is rolling out to help cushion the blow to the U.S. economy from the pandemic and keep credit flowing. They mark a dramatic escalation of the central bank’s interventions in financial markets by stepping into corporate debt potentially including the purchase of some sub-investment grade securities for the first time since the 1950s.

 

More information on corporate bond purchases by the secondary and primary facilities is “forthcoming,” the New York Fed announcement said.

https://www.marketwatch.com/story/fed-says-it-will-start-buying-corporate-bond-etfs-on-tuesday-2020-05-11

https://finance.yahoo.com/news/fed-says-begin-purchasing-corporate-004813631.html

 

Told you they would do the currency swaps and then this. It begins tomorrow. The High yield debt is EXACTLY the same shit they produced and pumped into the market starting in 2012 with the $29t stealth bailout. Cap#2 is when it started in late 2012 and the sole reason the markets got to where they were at-they never should have been at that level because it is solely becuase of that prin. This is the shit they will buy and place at muhFRBNY-and there is ALOT of it. BlackRock virtually invented the ETF market through it's iShares brand of them. Is it any wonder they were hired to "advise" the FRBNY on how to do this? No it's not.

Anonymous ID: cc4582 May 11, 2020, 7:45 p.m. No.9133486   🗄️.is đź”—kun

PBOC To Cut Rates Next: China CPI Huge Miss, PPI Prints At 4 Year Low

 

Heading into today's Chinese inflation print, the bond market was sending a mixed message: while consensus expected that China's economy would be hit hard by the coronavirus pandemic, the yield on China’s government bonds climbed to the highest level in nearly two months, suggesting either the worst from the deflationary drag was now behind China, or was the result of expectations for a large supply increase later this month. In retrospect, it was the former, because moments ago China's NBS reported that in April, CPI rose just 3.3%, sliding 1% from March and not only a huge miss to consensus of 3.7%, but missing the lowest estimate (the range was 3.4% to 4.3%). This was the lowest print since September 2019 when China was suffering from an acute surge in food prices driven by pork hyperinflation (the result of another virus).

 

The bulk of the miss was due to a drop in food inflation, which dropped from 18.3%YoY to 14.8% vs March (a -3%MoM decline), with pork prices falling 7.6% as supply continues to come to market just as demand is fleeing said market. There was also weakness in transportation and recreation segments, reflecting subdued activity despite China’s bombastic reopening.

 

Meanwhile, factory gate prices, or Producer Price Inflation a proxy for corporate profits, plunged deeper into the red, sliding to -3.1%, more than double the March decline of -1.5%, missing consensus estimate of a -2.5% drop, and the lowest print since April 2016. And since PPI is a close proxy for industrial profits which as discussed recently are in freefall, it is very likely that we will witness a record low PPI print as soon as next month. And while China's accelerating disinflation is bad news not only for the country but also the entire world, as China was critical during the last financial crisis do unleash a global reflationary wave across the globe, the fact that China is also succumbing to lower prices has very adverse consequences for global growth.

 

There is a silver lining: as we wrote earlier today when looking at China's credit creation, the elevated CPI inflation in recent months had been an unfavorable factor for monetary policy (even though it has largely been due to virus shock impacts such as supply shock to food). However, as the PBOC noted over the weekend in its quarterly monetary policy report - in which it reaffirmed its expansionary stance by promising stronger monetary policy action ahead - CPI inflation has started to go downward, and inflation expectations are currently stable.

 

As a result, with inflation now sliding fast the biggest hurdle before the PBOC for a wholesale rate cut is now gone, and instead of using a targeted approach to injecting liquidity in the system via new yuan loans, local bond issuance and the occasional RRR cut, the central bank will very soon enter the comfort zone where it too follows the rest of the world in cutting rates sharply lower in hopes of stimulating the economy.

https://www.zerohedge.com/markets/pboc-cut-rates-next-china-cpi-huge-miss-ppi-prints-4-year-low