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Fed Treads Cautiously Into Muni Market With Loan Lifeline

  • Central bank isn’t making open-market buying, as some sought
  • Fed leaves the door open to more steps if they are needed
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Fed Takes Sweeping New Steps to Provide Up to $2.3 Trillion in Loans
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The Federal Reserve is treading carefully into the $3.9 trillion municipal-bond market.

The central bank announced on Thursday that it would lend as much as $500 billion to states and the biggest local governments to cover massive tax shortfalls brought on by the swift slowdown in the economy, preventing a wave of short-term debt sales from hitting the public markets. But it stopped short of swooping in to buy long-term debt to head off another sell-off like the one that erupted last month, as it is doing with corporate bonds, collateralized loans and commercial mortgage-backed securities.