Fed launches $600 billion corporate loan

The Federal Reserve Board (FRB) launched the “Main Street Lending Program (MSLP)” for SMEs on the 15th. This is the start of all emergency funding support for the new coronavirus measures. With a total of over $4 trillion (about JPY 430 trillion), it will have a risk of loss that a central bank has no experience with.

The Boston Fed, which is in charge of MSLP practice, announced that it has begun accepting loans on the 15th. It targets small and medium-sized businesses with 15,000 employees or less, and many US companies that cannot directly raise money in the capital market will be supported by the Fed. The funding limit is up to $600 billion, which is close to 15% of the outstanding loans of US companies (non-financial) of just under $4 trillion.

Private banks are responsible for direct financing, of which 95% is purchased by SPVs (Special Purpose Vehicles) established by the Fed. Although formally indirect financing, the Fed will be responsible for most of the risk of loss. The loan period is 5 years, and you do not even need to repay the principal for the first 2 years. Companies whose sales have decreased due to the new Corona can secure working capital for the time being.

The Fed typically limits loans and other transactions to private banks. However, the Federal Reserve Law, which is the foundation law, allows the Fed to fund corporations and individuals only in “abnormal and emergency situations.” This loan to the operating company will be a very unusual measure that did not go into the financial crisis of 2008.

(Source: Nikkei newspaper)

US stocks are rising due to the Fed’s unusual measures. This week, I assumed that the second party of the new Corona would lean toward risk-off, but the Fed has moved ahead of this.

〇 BOJ has expanded the total amount of monetary policy maintenance support and cash flow support to over 110 trillion yen

Impact of corona “extremely high uncertainty”, additional mitigation without hesitation if necessary
The economy is extremely severe, prices have been revised downward to “negative” for the time being
At the monetary policy decision meeting on the 16th, the Bank of Japan decided to maintain the monetary policy management policy based on the framework of quantitative and qualitative easing with long and short interest rate manipulation. By implementing a series of measures that have been implemented to counter the effects of the new coronavirus, we will endeavor to support the financing of companies and maintain a stable financial market. In line with the establishment of the second supplementary budget for FY2020, the total budget for special programs for cash flow support was expanded.

According to the reference material released after the meeting, the total number of special programs including the purchase of commercial paper (CP) and corporate bonds and the special financial support for new coronavirus infection will exceed 110 trillion yen, which is more than 75 trillion yen compared to the past. Increased from. Measures associated with the expansion of real interest-free and unsecured loans to companies in line with the establishment of the second amendment. The breakdown is that CP and corporate bonds have remained unchanged at 20 trillion yen, and the corona response operation, which includes new funding measures starting in late June, was 90 trillion yen, an increase from the previous 55 trillion yen.

(Source: Bloomberg)

The Bank of Japan is also expanding its easing in line with the United States.

Impression that each country is taking the initiative in anticipation of the second type of new corona.
If this happens, we assume that the stock price will not collapse and that it is likely that it will remain stable for the time being.

Currently, the power balance in 15 minutes is

AUD > GBP > CAD > CHF > NZD = USD > JPY > EUR

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