Global Markets Recap
The Federal Reserve disclosed the list of 794 companies whose corporate bonds they bought including Apple, Verizon, Toyota (the U.S. division), and drugmaker AbbVie. Central bank skeptics – of which there are many – will ask: do FANG stocks & other household equity names need – or better yet, deserve – what can only be described as a government bailout.
Answer: it’s complicated.
On paper, no doubt, this looks suspect. Apple, in particular, is slowly taking over the world as the stock, like many tech peers, contemplates new all-time highs. 30 million lose their jobs & the printing presses are turned on to ensure a Silicon Valley consumer-products behemoth doesn’t miss its quarterly earnings. Ah, the Fed is apolitical – lest we forget.
The reality is more complex. One bad print on Apple & Verizon bonds might cripple less sturdy firms as debt markets are dominated by relative value traders who arbitrage small price differences across a spectrum of assets. Put another way, plenty of companies whose bonds weren’t bought by the Fed likely benefited by proxy. One of those companies was not oil & gas stalwart Chesapeake Energy, which filed for bankruptcy this weekend. And that’s the point: while the Fed shouldn’t have to pick winners & losers, they’ve hardly been left any other choice.