Fed to Inject $1.5 Trillion in Bid to Prevent ‘Unusual Disruptions’ in Markets

The Federal Reserve said it would make vast sums of short-term loans available on Wall Street and purchase Treasury securities in a coronavirus-related response aimed at preventing ominous trading conditions from creating a sharper economic contraction.

The Fed’s promise to intervene substantially in short-term money markets, together with a move that opens the door to a resumption of bond-buying stimulus known as quantitative easing, followed two days of trading in which market functioning appeared to have degraded.

That is a concern for the Fed because the Treasury market is the most liquid and actively traded bond market in the world, providing a backbone for everything from hedging trades to conducting monetary policy.

“These changes are being made to address highly unusual disruptions in Treasury financing markets associated with the coronavirus outbreak,” the New York Fed, which conducts the central bank’s market operations, said in a Thursday statement.