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Every American citizen, along with the rest of the world, has been impacted by COVID-19, better known as the coronavirus disease. In these uncertain times, businesses are moving to work-from-home operations, events have been postponed or canceled, and school districts across the country have closed their doors.

What Happened

We could have sworn that somewhere in the distance we could hear George Jetson screaming, “Jane, stop this crazy thing!” The week began with the Fed re-launching Quantitative Easing 4 (the initial launch the prior Sunday night- $500 billion treasury notes, $200 Agency MBS didn’t cut it), promising to buy unlimited

The stimulus package is here! Well, almost here—the House of Representatives still has to pass it. In concert with the package, the Fed this week embarked on unlimited Quantitative Easing, taking their balance sheet to $5 trillion for the first time with massive purchases of Treasury notes and Agency MBS. The Fed has bought $50 billion Agency MBS per day since Monday.

In times of national emergency or market disruption, scammers capitalize on public fear to take advantage of vulnerable consumers. FinCEN and many other organizations have issued warnings and red flags to help financial institutions and their customers identify and stop potential scams, including:

What Happened:

Last week was perhaps like no other week. On Sunday night the Fed tried shock and awe, slashing their policy rate to zero (0-.25%), adding trillions of new liquidity vehicles and announcing new Quantitative Easing measures, $500 billion Treasury notes and bonds and $200 billion Agency MBS.

What Happened

Well, that all went sideways in a hurry. Fear, uncertainty and more fear ruled the markets last week. Any semblance of liquidity exited every market sector as the phrase from investors, “I didn’t know that could happen” actually happened. The 30-year Treasury bond traded at a price as high as 135.09 (yield of .70 %) and as low as 104.875 (yield of 1.78%). With regard to liquidity in the world’s most liquid market, Treasuries, the Exchange Traded Fund (ETF), TLT, which tracks Treasury bonds with maturities greater than 20 years found its price Thursday at a 5% discount to Net Asset Value.

A little nonsense now and then is relished by the wisest men. – Willy Wonka

As our leaders in Washington DC bicker over a fiscal response to COVID-19, mostly coming up with ideas that look to win votes (payroll tax holidays, guaranteed sick leave for everyone, tax credits for affected companies) as opposed to actually saving the economy from a credit induced depression, it looks like it is on the Fed again to do the job. To that, the question is, just what does the Fed has left in its arsenal?

In the past ten years, the country has made great strides towards economic recovery, and many millennials who entered the job and housing markets during the downturn have had a chance to pay down their student loan debt and advance in their careers, which means that they finally feel confident about owning a home. In fact, homeownership rates among people in their late 20’s and early 30’s are two to four times higher than any other age group.¹

What Happened:

The appropriate answer to “What happened last week?” could be, “What DIDN’T happen last week?” While not as scary as the week Lehman died, last week was right up there. As COVID-19 continued to spread both in the US and the rest of the world disrupting just about everything that drives the global economy, the Federal Reserve came with a 50 basis point inter-meeting cut to their policy rate on Tuesday.

What Happened:

If it were a fight, they would have stopped it on Wednesday. The virus COVID-19 was all that mattered this past week as stocks were routed the most since the Financial Crisis, while multiple Fed rate cuts were priced in from, maybe 1 at the beginning of the week to probably 3 when the closing bell rang on Friday afternoon. Any asset that wasn’t a US Treasury note was for sale. The high-yield bond and loan market froze up. Liquidity is like oxygen, you only notice it when it is not there.