Thread by @RickRieder

After a week that saw extraordinary policy moves from the @federalreserve in response to the #CoronaCrisis, the central bank has gone further and taken off its gloves for a bare-knuckled battle against the forces of #uncertainty and #deflation!

To support critical market functioning, the #FOMC dropped previously indicated limits and: “will purchase Treasury securities and agency [MBS] in the amounts needed to support smooth market functioning and effective transmission of monetary policy...”

Further, the #Fed has expanded the range of purchasable #securities to include agency commercial mortgaged-backed securities (#CMBS).

In an attempt to keep the flow of #credit available to large employers the #Fed established the Primary Market Corporate Credit Facility (PMCCF) for newly issued bonds/loans and the Secondary Market Corporate Credit Facility (SMCCF) to aid with secondary market #liquidity.

A third facility, the Term Asset-Backed Securities Loan Facility (TALF) is intended to aid the flow of #credit to consumers and smaller #businesses by helping to: “enable the issuance of asset-backed securities (ABS) backed by student loans, auto loans, credit card loans…”

“… [and] loans guaranteed by the Small Business Administration (SBA), and certain other assets.” Taken together, these facilities will initially provide up to $300 billion in new #financing, and the @USTreasury will provide $30 billion in #equity to the facilities.

Overall, these facilities should help calm the extreme spread widening witnessed in many #securitized sectors, particularly at the level of AAA #assets, which are far more important to stabilize than worrying about the #volatility in equity #markets for now, in our view.

Additionally, the #Fed is aiding the flow of #credit to #municipalities by expanding its MMLF program to include #muni variable rate demand notes (VRDNs) and bank #CDs. Finally, it’s working on an effort to more directly aid small-to-medium sized businesses, alongside SBA.