Bond Outlook November 26th

“TARP” begets “TALF” (Term Asset Loan Facility) as US Government banking support extends beyond mortgage-backed securities to securities backed by credit cards, student loans and car loans. Paulson and company have recognised that, while injecting funds into banks via preference shares is no bad idea, direct price support of troubled assets remains an important element of the rescue plan.

The Treasury itself is not buying the assets, but having the Fed do it.