Fed Acts Again

kevin-temp2
Head of Fixed Income Strategy
Follow Kevin Flanagan
03/12/2020

The Federal Reserve (Fed) has come in yet again on an inter-meeting basis . Here’s the quick take:

  • More importantly, the Fed will be increasing the size of its repo operations to $500 billion each today and tomorrow. That’s $1 trillion in funding market injections!
  • These operations will continue on a weekly basis using one- and three-month maturities. This is key because it provides liquidity/funding for a “term” period, not just overnight.
  • More to come? We’re going to be keeping a watchful eye out between now and the Mar 18 FOMC meeting.
  • Another rate cut sure seems to be in the cards, but in my opinion, they are of little utility here—IT’S THE FUNDING MARKETS!
  • Today’s announcement is a step in the right direction, but I would like to see more. Give it all you got! Now is not the time to be cute…
  • Be even more proactive and reinstall the financial crisis playbook, reopening the “alphabet soup” facilities that were used then.
  • Avoiding stresses in the funding markets should be the Fed’s primary goal.
  • Let fiscal policy aid the economy. Given the toxic situation in DC, I know this seems like a tough call, but Congress and the White House need to come together and pass something now!
  • The only way to break this negative feedback loop is monetary and fiscal policy acting in coordination. The Fed is doing its part…

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About the Contributor
kevin-temp2
Head of Fixed Income Strategy
Follow Kevin Flanagan
As part of WisdomTree’s Investment Strategy group, Kevin serves as Head of Fixed Income Strategy. In this role, he contributes to the asset allocation team, writes fixed income-related content and travels with the sales team, conducting client-facing meetings and providing expertise on WisdomTree’s existing and future bond ETFs. In addition, Kevin works closely with the fixed income team. Prior to joining WisdomTree, Kevin spent 30 years at Morgan Stanley, where he was most recently a Managing Director. He was responsible for tactical and strategic recommendations and created asset allocation models for fixed income securities. He was a contributor to the Morgan Stanley Wealth Management Global Investment Committee, primary author of Morgan Stanley Wealth Management’s monthly and weekly fixed income publications, and collaborated with the firm’s Research and Consulting Group Divisions to build ETF and fund manager asset allocation models. Kevin has an MBA from Pace University’s Lubin Graduate School of Business, and a B.S in Finance from Fairfield University.