Chair Jerome Powell’s announcement this morning has spooked the US markets, with the futures price falling 5% and activating a trading halt.
The raft of announcements, which we have already covered has scared the markets, and it suggest a weak opening in the US later.
There are severe cracks opening up in the financial system, with treasury pricing haywire, the Feds initial massive repo sale under-subscribed, and direct liquidity support ineffective. Of course they want to shore up the financial markets, and he was at pains in the press conference (telephone) to underscore how well capitalised the banks are, and that negative rates are not coming.
Worth also noting the FED slashed the Interest on Excess Reserves that it pays the banks for parking their cash at the Fed to 0.10% effective Monday. Back in the heady days of 2019, the Fed paid the banks $34 billion in interest on reserves. This income just went away.
US Bank shares are under pressure. Here in Australia the Financials Sector Index is down around 4%, but rising from opening lows.
