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The Federal Reserve on Monday announced that it will buy Treasury and mortgage-backed securities “in the amounts needed” to support markets and the economy. The commitment to unlimited buying was new and so was a related extension of support for the corporate credit and municipal bond markets.
European and Asian central banks have seen mixed results from previous attempts to boost lending with purchases of corporate bonds – and even equities in the case of the Bank of Japan – but the Federal Reserve’s measures should help to ensure that core hedging markets at least remain functional.
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