Stock Market Bears Freak Out As Desperate Fed Plots Junk Bond Feast, Crypto Coins News
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Federal Reserve Chairman Jerome Powell has announced the Fed will be purchasing high-yield corporate debt, otherwise known as “junk” bonds.
This news helped lift the stock market, particularly fallen angels like Ford (NYSE: F)
Unfortunately, there could be systemic risks to the FOMC’s rising rising balance sheet, and stock market bears fear another crash.
The Federal Reserve will now do what was unthinkable to many at the start of the year and start buying high-yield or “junk” debt. While this might be good news for the stock market in the short term, the long-term structural implications have bearish traders freaking out.
Jerome Powell Pulls Out All The Stops To Halt The Stock Market Crash
Bear twitter can be a dark place during a bull-run, meaning many of the investors , economists, and analysts calling for a stock market crash have had a rough decade.
Over the last month, however, the coronavirus pandemic has smashed the Dow Jones and S&P , with many of these bearish commentators finally seeing justification for their negative outlook.
After the global economy came to a sudden halt, equities priced for zero risk were forced to correct dramatically, causing severe stress to the financial system, and precisely what the bears have feared for some time.
Enter the Federal Reserve, who has gone full MMT (Modern Monetary Theory) to keep the greenbacks flowing. In the process, Chairman Jerome Powell and the FOMC have expanded a balance sheet that could hit $ 25 trillion this year .
The latest news is that not only will the Fed be making a foray into the high-grade bond world through ETFs, but it will also now reach into riskier junk bonds after making the following addition to its purchase of eligible assets , stating,
The preponderance of ETF holdings will be of ETFs whose primary investment objective is exposure to US investment grade corporate bonds, and the remainder will be in ETFs whose primary investment objective is exposure to U.S. high-yield corporate bonds.
While the mainstream ignored this possibility, some commentators have been predicting it for a while.
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