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Alternative Market Briefing

Impact of the Fed's programs on credit markets

Thursday, April 02, 2020

Josh Galper
B. G., Opalesque Geneva:

The Federal Reserve said last week it would launch several several programs to "support households, businesses, and the U.S. economy overall in this challenging time."

"We've seen credit markets freeze up like this before but we've never seen the Fed take such immediate and massive actions in response in such a short time," says Josh Galper, managing principal at Finadium, a U.S.-based independent consultancy in capital markets.

Credit market freezes, in which debt issuance declines dramatically and market liquidity evaporates, are typically observed during financial crises - such as the current one. In the financial crisis of 2008-09, the structured credit market froze, the issuance of corporate bonds declined, and secondary credit markets became highly illiquid.

Galper goes on to describe the impact of such programs on the various credit markets.

No run on money market funds

"We've seen a number of impacts already from the Federal Reserve's intervention," Galper tells Opalesque. "The most important one has been a lack of run on money market funds. In 2008, one of the scariest situations was that money market funds were seen as unreliable, as they ......................

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