Fed Purchases Junk Bonds with 2800 Trillion Won Injection

IMF Managing Director: "Worst Since the Great Depression in Global Economy"

Jerome Powell, Fed Chair [Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] The U.S. Federal Reserve (Fed) has decided to purchase speculative-grade corporate bonds (junk bonds) to prevent the spread of the economic crisis caused by the novel coronavirus infection (COVID-19). To this end, it will inject an additional $2.3 trillion (approximately 2,800 trillion won) in liquidity. This move is being evaluated as a groundbreaking market stabilization measure alongside zero interest rates and quantitative easing (QE).

On the morning of the 9th (local time), the Fed announced in a statement that it will purchase some junk bonds, commercial mortgage-backed securities (CMBS), and collateralized loan obligations (CLOs).

The Fed explained this as "a measure to strengthen the response capabilities of state and local governments during the COVID-19 pandemic and to support businesses and households of all sizes."

This measure came immediately after the announcement of new unemployment claims in the U.S. last week. The U.S. Department of Labor reported that the number of claims reached 6.6 million last week. As an unprecedented recession causing 17 million unemployed people in three weeks spread, the Fed stepped in. It showed its determination to precisely target and block the cracks seen throughout the economy.

Fed Chair Jerome Powell promised proactive action to overcome the economic crisis. In the statement, he emphasized, "The Fed's role is to support liquidity and back stability to the extent we can."

On the same day, Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), also expressed concern that the global economy will record its worst performance since the Great Depression of the 1930s. She forecasted that "more than 170 countries will experience negative growth," suggesting that the global economic growth forecast to be announced at the IMF Spring Meetings on the 14th will be downgraded. The IMF has 189 member countries.

This content was produced with the assistance of AI translation services.