NEW YORK: The Federal Reserve offered a huge injection of liquidity to the Treasury market Thursday to counter signs of market dysfunction as investors panic over the spreading coronavirus.
The dramatic expansion comes amid widespread financial-market turmoil, which led to a seizing-up of the Treasury market Wednesday. “This is really brought on by what I’m guessing were a flood of calls from the street in the last few days about how badly Treasury markets were functioning,” said Blake Gwinn, a strategist at NatWest Markets in Stamford, Connecticut.The S&P 500 ended the day down a staggering 9.5% in its worst day since Black Monday more than three decades ago.
Joseph Abate, a strategist at Barclays in New York, said in a note to clients after the announcement that the “massive injection of liquidity” would help to restore confidence in funding markets. Still, because the moves were intended to address market functioning and not to provide stimulus to an economy facing down the potentially-severe impact of the outbreak, investors ended up clamouring for more Wednesday.