BofA Calls For “War-Time Measures”, Urges Near-Total Fed Takeover Of Capital Markets
Instead, as BofA’s rates strategist Marc Cabana writes, there is “growing potential for the Fed to step up its already impressive policy response as lender of last resort.” Specifically, in the coming days and weeks BofA sees a growing likelihood of:
– Adoption of UST yield curve targeting
– Full and unlimited backstop to the Agency MBS market
– Addressing regulatory constraints that have plagued intermediation of Fed repo
– Re-launch of a new TALF-like program offering senior funding on ABS, CMBS, CLOs, longer-dated munis, and investment grade corporates
– Provide guidance on the potential resolution plan for any failing entities to avoid fire sales of less liquid, riskier assets such as high yield debt, mezzanine structured product tranches, CRTs, and MSRs.