Key parts of the U.S. debt markets are functioning again, a sign the Federal Reserve’s extraordinary steps are easing a credit market crunch.
Investors say the Fed has reduced disruptions in the $17 trillion U.S. Treasurys market that had sent shock waves through the financial system. Large businesses such as Oracle and CVS Health are borrowing money at a record pace. Some lower-rated companies are issuing bonds again. And increased demand for mortgage bonds is starting to pull mortgage rates lower after they unexpectedly rose last month.
Debt markets remain far shakier than they were about a month ago. Most new bond sales are still coming from well-established companies with higher credit ratings, reflecting a consensus that the coronavirus crisis will push the economy into a deep recession. Liquidity, or the ease with which investors can buy and sell securities at what they think are market prices, remains poor in some riskier corners of the market. Some worry conditions could quickly deteriorate again, if the economic outlook darkens further.
Still, investors and analysts say the Fed’s historic interventions have spurred a meaningful reduction in market stress. Those include announcing plans to buy unlimited amounts of government bonds and mortgage securities issued by government-supported entities and starting new programs to buy higher-rated corporate bonds.
“The liquidity side is being fixed,” said Michael Collins, a senior portfolio manager at PGIM Fixed Income. – WSJ
Cross currency basis swaps for GBP, JPY and EUR all positive now, the more negative the metric the more expensive to acquire Dollars. So Dolalr shortage well past the “fixed”stage
Positive news Flows Continue in Virus Hot spots causing another leg higher in Risk
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Tale of the Tape net change for European Bourses