The Federal Reserve took aggressive steps to ease what it called “temporary disruptions” in Treasuries, flooding the market with liquidity and widening its purchases of U.S. government securities in a measure that recalls the quantitative easing it used during the financial crisis.
Under the Fed’s existing program to buy US$60 billion a month in securities, the purchases will be widened to include coupon-bearing notes across a range of maturities to match the maturity composition of the Treasury market, it said. “This is a full-blown crisis response operation, intended to make it abundantly clear that the Fed will not allow liquidity to dry up,” said Ian Shepherdson, chief economist of Pantheon Macroeconomics. “We expect the Fed to purchase US$60 billion of securities across the spectrum for the foreseeable future: QE4 is here.
“President Trump set out to calm everyone’s concerns, and he added fuel to the fire,” said Jack Ablin, chief investment officer of Cresset Capital Management, a Chicago-based wealth-management firm. “Right now, if you look at the technicals, we had finally slipped into what I’d call panic.”
The money’s already gone.