Fed to Keep ‘Invisible Presence’ in Bond Market, Citigroup Says
- Investors expect more Fed intervention during future crises
- Easy liquidity may face regulatory pressure under Biden
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The Federal Reserve will keep its “invisible presence” in the corporate-bond market even after unwinding a program that sent borrowing costs for companies plummeting while spurring a rally in credit, according to Citigroup Inc.
The Fed couldn’t credibly exit the debt market because “it cannot tolerate the catastrophic consequences of bond origination and secondary trading snapping shut,” Citigroup strategists led by Daniel Sorid wrote. They also noted that the central bank’s sale of its portfolio by year end will be easily absorbed.