3 ms·

HYG and LQD contain foreign bonds so we are bailing out foreign companies. FED is buying standard corporate paper along with these ETFs. Majority of the mon

by adrr 6y ago

HYG and LQD contain foreign bonds so we are bailing out foreign companies. FED is buying standard corporate paper along with these ETFs. Majority of the money that the fed is dumping into the economy is buying corporate paper to give liquidity to companies and preventing banks from failing. This secondary purchase seems like we're bailing out crappy high yield ETFs and not the actual distressed companies or preventing banks from going insolvent due to runs on deposit accounts.

whatok 6y ago
The vast majority of issuers in both those ETFs (especially HYG) are US companies. A liquid ETF with substantial AUM that only holds US issuers does not exist. You'll have to blame the companies that created and marketed the benchmarks these ETFs track on that one. Also, the Fed has not purchased a single corporate bond yet so the "majority of the money" has gone to ETF purchases so far; the vast majority of the facility's capital is currently sitting in Treasuries. The mere announcement of investment grade ETF purchases re-opened the primary markets without the Fed spending a penny. High yield primary markets were completely shut for a week before the Fed said that they would purchase fallen angel bonds and HY ETFs. The whole purpose of these facilities is to make sure funding markets function properly and ensure that companies that would have been fine without the pandemic will be fine now; not bail out distressed companies that are going to go out business anyway. I don't even know what you're talking about with bank failures on this. The Volcker Rule really gutted bank prop trading and banks barely have any of this stuff on their balance sheets. It's a big portion of the reason why there was a massive lack of liquidity during the first quarter of the year.

3 ms·

HYG and LQD contain foreign bonds so we are bailing out foreign companies. FED is buying standard corporate paper along with these ETFs. Majority of the mon

by adrr 6y ago

whatok 6y ago
The vast majority of issuers in both those ETFs (especially HYG) are US companies. A liquid ETF with substantial AUM that only holds US issuers does not exist. You'll have to blame the companies that created and marketed the benchmarks these ETFs track on that one. Also, the Fed has not purchased a single corporate bond yet so the "majority of the money" has gone to ETF purchases so far; the vast majority of the facility's capital is currently sitting in Treasuries. The mere announcement of investment grade ETF purchases re-opened the primary markets without the Fed spending a penny. High yield primary markets were completely shut for a week before the Fed said that they would purchase fallen angel bonds and HY ETFs. The whole purpose of these facilities is to make sure funding markets function properly and ensure that companies that would have been fine without the pandemic will be fine now; not bail out distressed companies that are going to go out business anyway. I don't even know what you're talking about with bank failures on this. The Volcker Rule really gutted bank prop trading and banks barely have any of this stuff on their balance sheets. It's a big portion of the reason why there was a massive lack of liquidity during the first quarter of the year.