[Ed. – Not sure why it’s necessary for the Fed to back munis from 1 million-ish cities and bonds from every seller with a barely-non-junk rating. There’s no safety net. Not liking the really narrow leverage chokepoint. The exposure for the dollar is colossal here. Gold ain’t gonna save you. Who would be there to redeem it in currency you can buy food with?]
The Federal Reserve is not leaving any corner of the U.S. bond market behind in this crisis.
There’s no other way to interpret the central bank’s sweeping measures announced Thursday, which together provide as much as $2.3 trillion in loans to support the economy. It will wade into the $3.9 trillion U.S. municipal-bond market to an unprecedented degree, can now purchase “fallen angel” bonds from companies that have recently lost their investment-grade ratings, and has expanded its Term Asset-Backed Securities Loan Facility to include top-rated commercial mortgage-backed securities and collateralized loan obligations.
All this, of course, is in addition to the Fed’s relentless purchases of U.S. Treasuries and agency mortgage-backed securities. BlackRock Inc. said on Wednesday that the central bank’s balance sheet would most likely grow to more than $10 trillion in the coming year from $4.2 trillion at the start of 2020 and would potentially exceed 50% of nominal U.S. gross domestic product.