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From the article (emphasis added) > The Fed said Thursday it will invest up to $2.3 trillion in loans to aid small and mid-sized businesses and state and local
by arawde 6y ago
From the article (emphasis added)
> The Fed said Thursday it will invest up to $2.3 trillion in loans to aid small and mid-sized businesses and state and local governments as well as fund the purchases of some types of high-yield bonds, collateralized loan obligations and commercial mortgage-backed securities.
The qualifier is the fallen angels clause which I mentioned. The way this works is that the Fed buys investment-grade ETFs. The underlying indices for those funds still have companies which have been downgraded to junk, which are the falled angels. The Fed isn't going out and purchasing bonds directly in the bond market, they're using existing infrastructure to perform market operations.
- chrisco255 6y agoIt's the same difference. It doesn't matter if you buy an ETF or not. You're propping up a broken system and destroying price discovery for the bond market. Price discovery is the pillar of capitalism and efficient markets.
- JMTQp8lwXL 6y agoIf an ETF is composed of junk-grade bond debt, should the ETF also be considered junk-grade? How can the ETF remain "investment grade"?
- trhway 6y agolast time the Wall St wizards were able to do that with the junk mortgage bonds. Slice and dice. Junk in, triple-A out. And as far as i see the wizards are still there.