The Bond Market Thinks It Knows What’s Coming Next From the Fed
“The Federal Reserve has already unleashed a barrage of new policies to keep the economy out of depression. Investors reckon it’s lining up another one.The Fed’s version of the strategy known as yield-curve control is expected to involve capping yields on government bonds of a chosen maturity -– by buying however much it takes. For central banks that already cut short-term interest rates to zero, it’s a way to signal that they’ll stay low for an extended period, while helping pin down longer-term borrowing costs too.Japan has been doing this for years, and Australia adopted the idea in March as the coronavirus struck. The Fed, which has responded to the pandemic by bulk-buying Treasuries and showering business and local government with credit, may not be ready to follow suit right now. U.S. states are tentatively emerging from lockdown, and policy makers will want to see how economic activity picks up.”
Euro Comeback Rests on EU Leaders Agreeing on Recovery Fund
“Leaders in the euro area need to make its widely-touted recovery fund a reality to revive the fortunes of its battered currency. The euro’s comeback was threatened after the so-called frugal four — Austria, Denmark, Sweden and the Netherlands — countered a joint proposal by France and Germany for a 500 billion euro ($548 billion) fund by suggesting aid in the form of loans, not grants.”
Singapore Focuses on Jobs in New S$33 Billion Virus Relief
“Singapore’s Finance Minister Heng Swee Keat delivered a fourth fiscal package of S$33 billion ($23 billion) to counter the economic fallout of the coronavirus, providing specific support to saving jobs. The latest measures will help businesses and workers affected by border closures and movement restrictions, Heng said in a Parliament session Tuesday. The steps will push this fiscal year’s budget deficit to 15.4% of gross domestic product, the largest gap in the country’s history.”
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