March 16, 2020 — Fed Addresses Liquidity Strains


The Fed sped up its previously announced purchases of treasury securities to try and ease the strains on the financial markets.  On Friday, they announced they would buy about half of some $80 billion in treasury securities they said would be purchased over the course of a month.  They are ready to accelerate other planned purchases as needed.

The Fed’s rate setting committee has their set monthly-meeting on Tuesday and Wednesday of this week, and expectations are for another rate cut, which could take the benchmark federal-funds rate close to zero. It currently stands between 1% and 1.25%.

Fed Chair Powell has signaled the central bank will try to support the functioning of the market and the economy as a whole during the slowdown in activity currently in place to prevent the spread of the coronavirus.

Borrowers now have a rare opportunity to lock in super low rates through the use of swaps.  It is the time to review your long-term debt obligations to see where swaps can be best used for your business.