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To: Pelham

You realize the Fed is buying corporate bonds every week, right?


77 posted on 07/08/2020 1:56:07 PM PDT by Vermont Lt
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To: Vermont Lt

“You realize the Fed is buying corporate bonds every week, right?”

They are this year. Normally they only buy Treasuries.

They aren’t buying individual corporates, they are purchasing through established bond funds.

The purchase of corporates is being driven by the Covid shutdown. There is a danger of default on corporates because the companies may not have the income to cover their interest payments.

Holding defaulting paper won’t hurt the Fed. If that paper is held by commercial banks and financial firms there is a risk of serious deflation. This is the same battle that Bernanke and the 2008 Fed were confronted with when the mortgage bubble collapsed.


79 posted on 07/08/2020 2:20:03 PM PDT by Pelham ( Mary McCord, Sally Yates and Michael Atkinson all belong in prison.)
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