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Fed Already About Halfway Through Bond-Buying Announced Sunday

Matthew Boesler and Christopher Maloney

(Bloomberg) -- The Federal Reserve is already about halfway done in a single week with at least $700 billion of bond purchases to provide emergency liquidity to financial markets, delivering a clear sign that it could blow past that marker.

The U.S. central bank bought $272 billion of government debt this week and another $68 billion of mortgage-backed securities, according to New York Fed data compiled by Bloomberg Intelligence and Bloomberg News.

On March 15, the Fed announced it would buy “at least” $500 billion of Treasuries and $200 billion of mortgage-backed securities “to support the smooth functioning” of those markets, which had frozen up the week before amid investor panic over the spreading coronavirus outbreak. Fed officials this week repeatedly emphasized the “at least” part of the announcement.

The Fed has already detailed plans to buy another $75 billion of Treasuries on Monday alone, and $100 billion more mortgage debt over the course of next week.

Go In Strong

Fed Chair Jerome Powell told reporters during a conference call after the March 15 announcement that the central bank was “going to go in strong,” adding that Fed officials were “really going to use our tools to do what we need to do here, which is restore these important markets to normal function.”

After another week of market turmoil, analysts increasingly wondered whether that means expanding purchases to other markets, like those for municipal bonds and corporate debt, where the pain has been acute.

“In order to ease financial conditions, we’ll be on the lookout for the quantitative easing program to be expanded to include munis and/or corporates,” BMO Capital Markets strategists led by Ian Lyngen wrote Friday in a note to clients. “Note that the Fed already has the legal authority to buy munis per the Federal Reserve Act, but would need to receive Congressional authorization to buy corporate debt.”

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