The Financial Times writes "Investors call for Fed help in 'frozen' commercial paper market." They tell us, "The US Federal Reserve is coming under pressure to unblock a vital short-term funding market used by companies, as borrowing costs soar to the highest levels since the Lehman crisis. The US commercial paper market, where companies raise cash by issuing short-term debt, has seized up since the coronavirus outbreak tore into the financial system. Banks have stepped back, anticipating that issuers will rush to secure cash just as money-market funds -- a big buyer of CP -- sell assets to brace themselves for redemptions, according to Bank of America analysts." They quote BofA's Mark Cabana, "It's a big deal. The CP market is essentially frozen. Everyone wants to shore up cash. Coronavirus is a big concern and it is creating big one-way flows in markets that banks are struggling to deal with. The Fed needs to come in and be the buyer." The FT piece also quotes BlackRock's Rick Rieder, "It was the one thing they left out and it is absolutely critical that they get at that.... That requires more work and a discussion with the Treasury. My sense is that when [Fed chairman Jay Powell] said they are not done and are working on other things, that is front and centre." The FT article adds, "Some analysts and investors expect the Fed to dust off a funding facility created in October 2008 to buy commercial paper during the last financial crisis." Finally, they quote Federated Hermes' Deborah Cunningham, "We think the Fed will pull out some of its old facilities to help confirm liquidity in the commercial paper markets.... I expect that to happen soon."

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