Tuesday, January 28, 2020

Quote of the Day: Fed Facilitation

We've been expressing a lot herein lately our concerns over conditions across the corporate debt space. Below is from macro strategist Julien Brigden's latest note:
"...the weakest CCC tranches have rallied back, and there has been substantial flow into leveraged loan funds in the first two weeks of the new year. Some industry insiders have taken this as evidence of the robustness of the CDO structure.
I wonder how much of it reflects the Fed's generosity in repo and money markets, where they substantially eased liquidity by buying $60bn a month of bills and set up overnight and term repo facilities."
My answer to his 2nd-paragraph question, is: Virtually all of it -- when you add in market expectations for Fed policy going forward.

Ultimately, and it could be a ways off, I'm certain we'll look back on the lead-in to the next recession and point the finger firmly, once again, alas, at the Fed for facilitating yet another great debt bubble.

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