The Federal Reserve will sharply increase its purchases of short-term U.S. Treasury bonds to try to ease anxiety and disruptions in the financial markets over the coronavirus outbreak.
The Fed announced on March 12 that it’s injecting up to $2 trillion into short-term lending markets as a way to ensure that the Treasury bond market can function smoothly. It’s also broadening its ongoing $60 billion-a-month purchases of Treasurys to include longer-term bonds. Combined, the Fed’s actions led the stock market to sharply pare its losses. At first, it caused Treasury yields to fall before they rose back up again.
