LONDON (Reuters) – Steps taken by the U.S. Federal Reserve and other major central banks to maintain liquidity in markets has been “hugely helpful” in stabilising the spike in volatility in bond markets, Tradeweb Chief Executive Lee Olesky said on Friday.
The U.S. Federal Reserve has scooped up bonds and extended loans to banks and mutual funds in its unprecedented effort to backstop the economy in the face of the global coronavirus pandemic.
It has also offered more than $200 billion through foreign currency swap lines to other central banks so they can provide dollars to help their firms and other borrowers stay current with their dollar-denominated liabilities. [nL1N2BJ374]
“The Fed action was huge and essential and really changed the markets this week,” Olesky said during a webinar. “What we’ve seen from Fed is hugely helpful.”
In recent weeks, investors have even had trouble buying and selling U.S. Treasuries, considered the safest of all assets. That’s a highly unusual occurrence for one of the world’s most readily tradable financial instruments. [nL1N2B904A]
“Volatility has been exceptional, certain days are more trying then others,” Olesky said. “We have moved into a more stable environment.”
(Reporting by Dhara Ranasinghe; editing by Marc Jones)