Multiple Federal Reserve officials have used the phrase “building a bridge” in recent days to describe the central bank’s unprecedented actions across U.S. bond markets. In their minds, it’s the Fed’s job to do whatever it takes to keep credit flowing through the financial system while the economy is largely shuttered.
For the most part, I support that. And yet, there’s one part of the central bank’s April 9 announcement that still makes little to no sense. To borrow their language, the Fed buying high-yield bond exchange-traded funds feels like a bridge to nowhere.