Fed Opens Floodgates as Investors Flee to Cash
March 25, 2020 by Bernice Napach
Cash is king in a market that has now a suffered declines of more than 30% in major stock market indexes since mid-February, sloppy trading in investment-grade bond funds that were supposed to offset the risks of stocks and 10-year Treasuries yielding about 70% more than they were in early March.
Even gold, which, along with Treasuries often acts as flight-to-safety assets, has lost 7.5% of its value, from recent highs near $1,675 an ounce reached in late February and again in early March.
The Federal Reserve is trying hard to support financial markets and the economy. After announcing $700 billion in asset purchases last week, on Monday morning the Fed opened the spigots. It removed any limits on that revived quantitative easing program, saying it would continue to purchase Treasuries and MBS in “amounts needed to support smooth market functioning and effective transmission of monetary policy” to support financial conditions and the economy.