{"id":116988,"date":"2020-11-21T00:50:00","date_gmt":"2020-11-20T21:50:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/why-a-rare-fed-treasury-rift-isnt-causing-markets-to-freak-out-so-far\/"},"modified":"2020-11-21T00:50:00","modified_gmt":"2020-11-20T21:50:00","slug":"why-a-rare-fed-treasury-rift-isnt-causing-markets-to-freak-out-so-far","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/why-a-rare-fed-treasury-rift-isnt-causing-markets-to-freak-out-so-far\/","title":{"rendered":"#\n  Why a rare Fed-Treasury rift isn\u2019t causing markets to freak out\u2014so far"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3ea64fb29c9\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3ea64fb29c9\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/why-a-rare-fed-treasury-rift-isnt-causing-markets-to-freak-out-so-far\/#Programs_offer_backstop_that_will_be_missed_if_market_strains_return_economists\" >Programs offer backstop that will be missed if market strains return: economists<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/why-a-rare-fed-treasury-rift-isnt-causing-markets-to-freak-out-so-far\/#William_Watts\" >William Watts<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong>#<br \/>\n  Why a rare Fed-Treasury rift isn\u2019t causing markets to freak out\u2014so far<br \/>\n<\/strong>&#8221;<\/p>\n<h2 class=\"article__subhead\" itemprop=\"alternativeHeadline\"><span class=\"ez-toc-section\" id=\"Programs_offer_backstop_that_will_be_missed_if_market_strains_return_economists\"><\/span>\n  Programs offer backstop that will be missed if market strains return: economists<br \/>\n<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><\/p>\n<div class=\"column column--full article__content\">\n<div id=\"js-article__body\" class=\"article__body article-wrap at16-col16 barrons-article-wrap\" itemprop=\"articleBody\" data-sbid=\"WP-MKTW-0000076127\">\n<div class=\"barrons-article-ad-wrapper\">\n<div data-track=\"barrons-article-ad-wrap\" class=\"barrons-article-ad sticky_item\">\n<div class=\"barrons-main-article-ad-target sticky_target body_ad\" aria-hidden=\"true\"><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<p>       A rare rift between the Treasury Department and the Federal Reserve was taken largely in stride by investors on Friday, but it might be too early to send the all-clear signal.<\/p>\n<p> Treasury Secretary Steven Mnuchin late Thursday, in a letter to Federal Reserve Chairman Jerome Powell, announced that he would allow several emergency lending programs administered by the Fed to expire on Dec. 31. Those include programs designed to support the corporate bond, municipal bond, and asset-backed securities markets, as well as the Main Street Lending Program.<\/p>\n<div class=\"paywall\">\n       The move came days after Powell said he was in no hurry to end such programs. In a statement, almost im<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/social-mediaa\/\" data-internallinksmanager029f6b8e52c=\"1\" title=\"Social Media\" target=\"_blank\" rel=\"noopener\">media<\/a>tely following the Treasury action, the Fed said it opposed the decision. <\/p>\n<p><strong>Read:<\/strong> Mnuchin says decision to end Fed emergency programs wasn\u2019t aimed at hurting Biden<\/p>\n<p><strong>Also see:<\/strong> Fed\u2019s Evans says he\u2019s dis<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>ointed by Treasury decision to end emergency loan programs<\/p>\n<p>However, credit spreads didn\u2019t blow out Friday. Treasurys, which often serve as a haven, did see some buying interest, pulling down yields, but stocks spent most of the day trading flat to slightly lower before extending losses modestly in the final hour of trade. <\/p>\n<p>The Dow Jones Industrial Average<br \/>\n        DJIA,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/210598065\/realtime\" class=\"negative\">-0.74%<\/bg-quote><br \/>\n       ended the day down 219.75 points, or 0.7%, while the S&amp;P 500<br \/>\n        SPX,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/210599714\/realtime\" class=\"negative\">-0.67%<\/bg-quote><br \/>\n       also declined 0.7%.<\/p>\n<p><strong>Need to Know:\u00a0<\/strong>What\u2019s next for markets after Treasury Secretary Steven Mnuchin pulls the $455 billion plug <\/p>\n<p>After all, analysts said, the programs have been relatively little-used. But that rationale might miss the point, some economists argued.<\/p>\n<p>That is because markets have been orderly, perhaps in part because of the existence of a safety net. The Treasury\u2019s move takes away a backstop that would be missed if financial markets come under renewed stress, they argued. It was the near breakdown of credit markets in the early days of the pandemic earlier this year that prompted the Fed and Treasury to create the programs in the first place.<\/p>\n<div id=\"cx-membership-tile\"><\/div>\n<p>Economists and investors could also look back to the early part of this decade at an arguably even more remarkable case of crisis fighting. In 2012, during the darkest days of the eurozone debt crisis, European Central Bank President Mario Draghi vowed to do \u201cwhatever it takes\u201d to preserve the euro.<\/p>\n<p>Those words were followed up with the creation of the ECB\u2019s Outright Monetary Transactions program, which would allow the central bank to undertake massive bond purchases if needed to drive down borrowing costs for stressed countries. That program was never actually used, but its existence was enough to ensure that unsustainably high yields on Italian government bonds and other stressed eurozone countries retreated, helping cool the crisis.<\/p>\n<p>Robert Perli, co-founder of Cornerstone Macro Research and a former Fed staffer, argued on Twitter that it was the role the Fed programs played as a backstop that made them worthwhile:<\/p>\n<div data-layout=\"inline\n              \" data-layout-mobile=\"\" class=\"\n        media-object\n        type-InsetTweet\n          inline\n    scope-web|mobileapps\n  article__inset\n        article__inset--type-InsetTweet\n          article__inset--inline\n  \"><\/p>\n<div class=\"dynamic-inset-container article__inset__dynamic\">\n<style>\n            iframe.twitter-tweet {\n                width: 100% !important;\n            }\n        <\/style>\n<blockquote class=\"twitter-tweet\" lang=\"en\"><p>\n            <a rel=\"nofollow noopener noreferrer\" target=\"_blank\" href=\"https:\/\/twitter.com\/R_Perli\/status\/1329800790916145158\"><\/a>\n            <\/p><\/blockquote>\n<p>        <script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/div>\n<\/p><\/div>\n<p>       Since markets aren\u2019t in free fall, it was no surprise the announcement had little impact on markets Friday, with investors more focused on the potential for a vaccine-fueled economic recovery next year and less concerned about the risk of a corporate or municipal solvency crisis, said Oliver Jones, economist at Capital Economics, in a note.<\/p>\n<p> \u201cThat is surely part of the reason for the very limited market reaction to Mnuchin\u2019s announcement\u201d Jones wrote.<\/p>\n<p>Another reason for the muted response, he said, might be that investors don\u2019t believe the safety net will actually be taken away. Mnuchin\u2019s successor in the incoming administration of President-elect Joe Biden could move to extend the program, he said, though such action might require the cooperation of what\u2019s likely to be a divided Congress.<\/p>\n<p>More broadly, Jones argued that a key lesson of the COVID-19 crisis for policy makers and investors centers on the success of speedy and decisive moves by the Fed and other central banks to backstop markets for risky assets.<\/p>\n<p>\u201cWe doubt that this lesson has been lost on investors, or indeed overturned by Mnuchin\u2019s decision,\u201d he wrote. \u201cIn fact, we still think that heightened expectations for central bank support of risky assets in times of trouble will be an important legacy of COVID-19 for financial markets.\u201d<\/p><\/div>\n<\/div><\/div>\n<p><\/p>\n<div class=\"byline article__byline\">\n<p>      <span>By<\/span><\/p>\n<div class=\"author  hasMenu\" data-scrim='{\"type\":\"author\",\"header\":\"William Watts\",\"subhead\":\"The Wall Street Journal\",\"list\":[]}' itemscope itemprop=\"author\" itemtype=\"http:\/\/schema.org\/Person\">\n<h4 itemprop=\"name\"><span class=\"ez-toc-section\" id=\"William_Watts\"><\/span>William Watts<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/p><\/div>\n<\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener noreferrer\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/news\/\" target=\"_blank\" rel=\"noopener noreferrer\">News category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"http:\/\/www.marketwatch.com\/news\/story.asp?guid=%7B21005575-02D4-D4B5-4572-D1295F54F8E2%7D&#038;siteid=rss&#038;rss=1\" target=\"_blank\" rel=\"noopener noreferrer\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# Why a rare Fed-Treasury rift isn\u2019t causing markets to freak out\u2014so far &#8221; Programs offer backstop that will be missed if market strains return: economists A rare rift between the Treasury Department and the Federal Reserve was taken largely in stride by investors on Friday, but it might be too early to send the&#8230;<\/p>\n","protected":false},"author":1,"featured_media":116989,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[70897],"tags":[],"class_list":["post-116988","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/116988","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=116988"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/116988\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/116989"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=116988"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=116988"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=116988"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}