· Fed launches long-awaited Main Street lending program, seeks to reach nonprofits
The Federal Reserve on Monday launched its Main Street Lending Program, the most complex program undertaken yet by the U.S. central bank to help keep the backbone of the economy from buckling under the strains of the coronavirus pandemic.
The program, targeted at companies that were in good shape before the pandemic but may now need financing to retain workers and fund operations, will offer up to $600 billion in loans through participating financial institutions to U.S. businesses with up to 15,000 employees or with revenues up to $5 billion.
Lenders must register using the lender portal here and are encouraged by the Fed to begin making program loans to for-profit firms "immediately."
The central bank also sought feedback on Monday on a proposal to expand the program to allow nonprofit organizations to borrow under the program as well.
· Fed will begin purchasing corporate bonds on Tuesday
The Federal Reserve said it will start purchasing corporate bonds on Tuesday through the secondary market corporate credit facility (SMCCF), one of several emergency facilities recently launched by the U.S. central bank to improve market functioning in the wake of the coronavirus pandemic.
The Fed will use an indexing approach when making purchases, aiming to create a portfolio that is based on a broad, diversified market index of U.S. corporate bonds.
· The Fed begins purchases of up to $250 billion in individual corporate bonds
The Federal Reserve announced Monday it will begin buying individual corporate bonds 85 days after unveiling the purchase policy and alleviating intense credit-market pressures.
The program, also known as the Secondary Market Corporate Credit Facility, will take in up to $250 billion in corporate bonds from eligible issuers. The Fed can also tap $25 billion in funding assistance from the Treasury Department as set aside by the CARES Act.
The central bank updated the program to "create a corporate bond portfolio that is based on a broad, diversified market index of US corporate bonds," according to a press release. The portfolio will complement purchases of corporate-credit exchange-traded funds through the SMCCF since May 12.
· Dollar steadies as overnight risk-off move eases
The U.S. dollar was slightly lower in North American morning trade on Monday, stabilizing after a move higher overnight on a sell-off in risk assets over rising fears of a second wave of coronavirus infections.
The dollar index, which measures the U.S. currency against a basket of six rivals, was 0.12% lower at 97.060. Still, the dollar remained far above last week’s three-month low, and risk assets broadly remained higher as fears of rising infections drove investors into safe havens like the dollar.
Against the euro it was 0.06% weaker to $1.126 and against the British pound it was 0.10% weaker to $1.255. The U.S. S&P 500 index was last down 0.85%, steadying after earlier in the session hitting its lowest since May 22.
China reintroduced restrictions in some areas after Beijing reported its biggest cluster of new infections since February. In the United States, more than 25,000 new cases were reported on Saturday alone.
Understanding the broader move higher in the dollar since last Wednesday as a recalibration also helps explain why the safe-haven Japanese yen had been strengthening against the dollar. On Monday it was slightly weaker at 107.38 yen to the dollar.
· EU and UK agree to speed up Brexit trade talks with the transition period expiring in six months
The European Union and the U.K. government have decided to intensify Brexit talks over the coming weeks amid growing concerns that both sides might fail to reach a trade deal by the end of the year.
British Prime Minister Boris Johnson spoke with European officials Monday, discussing ways to give new impetus to the trade negotiations, which after four initial rounds have not made any significant progress. The U.K. stopped being a full member of the EU in January, but it’s still in a transition phase so it can prepare for new trading rules with the rest of the EU.
The British government confirmed on Friday that it will not extend this transition and negotiating period beyond December. This means that pressure is growing on both sides to deliver a trade deal by October so it can be ratified and put in place for the new year.
· Oil jumps 2% on optimism around OPEC+ output pact
Oil prices rose on Monday as signs fuel demand was recovering while OPEC+ members were complying with a production cut deal outweighed fears that new coronavirus infections could further slow the global economy.
West Texas Intermediate crude rose 86 cents, or 2.37%, to settle at $37.12 per barrel. Brent crude rose 96 cents, or 2.5%, to trade at $39.73 per barrel.
Prices rebounded from early losses after the energy minister of the United Arab Emirates voiced confidence that OPEC+ countries with poor compliance to agreed cuts would meet their commitments and reported signs oil demand was picking up.
Reference: CNBC, Reuters
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