INSUBCONTINENT EXCLUSIVE:
By Rich MillerThe Federal Reserve rolled out several measures this week to support the economy and re-liquefy financial markets reeling from
the shock of an unprecedented shutdown
and open up new targeted lending facilities as it struggles to contain the fallout from measures to halt the contagion, Fed watchers
crisis-era moves in its effort to fight the contagion
commercial paper issuers and money market funds.
Run on muni-bond funds sends yields on shortest bonds soaring
On Friday, the Fed did
venture beyond its established playbook, expanding an emergency financing program for money market funds to include those that buy
instance, stopped short of what Democratic congressional leaders want -- and where some ex-central-bank officials think it should go -- to
help embattled municipalities on the front line in the war against the virus.
Outright PurchasesFormer Fed Vice Chairman Alan Blinder said
the central bank should use its existing authority to buy municipal debt outright
Under Section 14 of the Federal Reserve Act, the central bank can purchase municipal debt with six months or less to maturity.
Blinder, now
a professor at Princeton University, said Congress should broaden that authority to allow the Fed to buy longer-term debt issued by states
nearly broken down in the dash for cash by investors.
MBS, TreasuriesMortgage-backed debt has been hard hit as well, despite a pledge by the
who expects the Fed to raise purchases to $500 billion.
A corresponding increase in Treasury purchases -- the Fed has promised to buy at
least $500 billion of them -- also seems likely, Fed watchers said.
Since announcing the move, the central bank bought $272 billion of
Treasuries and $68 billion of mortgage-backed securities this week, according to New York Fed data compiled by Bloomberg Intelligence and
Bloomberg News.
In a video for clients, Cornerstone Macro LLC partner Roberto Perli laid out a series of additional steps the Fed could
take.
They include reactivating a term-auction facility to provide liquidity to banks and launching special lending windows for
